19th Mar 2018

Doing business with Russia: A German dilemma

  • Oil and gas are Russia's main exports to Germany (Photo:

German Chancellor Angela Merkel is a cautious politician. A natural scientist by formation, she never goes for bold statements unless they have been carefully weighed beforehand.

By her standards, the speech in the Bundestag last week was bold.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

She spoke of a three-step reaction to Russia's illegal actions in Ukraine. The assets freeze and visa ban on 21 names adopted on Monday (17 March) by EU foreign ministers are step two.

If Moscow does not change course and "further destabilises the situation, for instance in eastern Ukraine," step three - economic sanctions - will follow. Her statement was repeated on Monday by her spokesman, Steffen Seibert.

Seibert said Russia had done nothing to de-escalate the situation, had isolated itself on the international scene by recognising the "illegal" referendum in Crimea and further fuelled tensions, for instance by seizing control over gas pipelines in eastern Ukraine.

Economic sanctions will hurt Germany, too.

Russia exports mostly oil and gas to Germany, while German firms export industrial machines, trains, cars and medicines. More than 6,000 German companies are registered in Russia and are now fearing retaliatory measures from the Russian government - for instance having their properties seized or their assets frozen.

Smaller firms are fearing the Russian retaliation to a higher degree than big players like Volkswagen, Continental or Siemens. Several medium-sized firms have already halted deliveries to Russian factories to protect their investments, Frankfurter Allgemeine Zeitung reports.

Merkel on Friday downplayed their impact on the German economy, noting that bilateral trade with Russia (€76bn) is not worth much more than trade with the Czech Republic (€60bn), a much smaller country.

She was speaking in Munich where she met the representatives of the business community and industry chambers, who gave a cautious support to her stance.

Ulrich Grillo, head of the BDI association of German industries, said sanctions would hurt both sides. "But when international law is violated, sanctions have to be imposed," he said after talks with Merkel, adding that he was confident the government would decide with "a sense of proportion" in this regard.

Meanwhile, energy firms are speeding up their deals with the Russians. RWE, one of the major energy firms in Germany, on Sunday announced it would sell its oil-and-gas exploration firm in Russia for €5.1 billion.

The buyer is a Luxembourg-based investment fund linked to a Russian tycoon, Mikheil Fridman.

Another German energy company, Wintershall - a branch of the chemicals giant BASF - last Wednesday announced it was selling 20 percent of its gas storage facilities in Germany to Gazprom, the Russian monopoly.

Elmar Brok, a close ally of Merkel and head of the foreign affairs committee in the European Parliament, on Monday told journalists in Berlin that these deals were "irresponsible" and that energy firms need to take "broader responsibilities" than just the end-of-the-month profits.

"I am sure the European Commission will not allow the Wintershall-Gazprom deal. This is a monopoly, there has to be an anti-trust investigation," he said.

A spokeswoman for the energy ministry meanwhile also noted that the RWE deal may be subject to anti-trust investigations.

But both Brok and the government spokeswoman stressed that the "German economy is no state economy" and that the government has no means of telling private companies who to do business with.

As for replacing Russian gas supplies - Germany imports about 30 percent from Russia and the trend is increasing after it decided to shut down its nuclear plants - Brok mentioned possibilities to import more gas from Norway, the Middle East and the US.

"If all of Europe decided not to import any oil and gas from Russia anymore, it would bankrupt Russia. These are all moves that would hurt Russia much more than Europe. We don't want it, but we are not as powerless economically as some may think," Brok said.

Merkel: Comparing Crimea to Kosovo is 'shameful'

German Chancellor Merkel has said it is "shameful" to compare the independence of Kosovo with Crimea's independence referendum and called on Russia to stop its actions in Ukraine or face economic sanctions.

Merkel in Paris for eurozone reform talks

Angela Merkel - who started her fourth term as Germany's chancellor earlier this week - is wasting no time on big issues like eurozone reforms. On Friday she is meeting Emmanuel Macron where the two will seek common ground.

EU insists on US tariffs exemption

Europe is "an ally, not a threat", the EU Commission says - as the US is poised to impose duties in steel and aluminium. Common action on Chinese steel overcapacity could help diffuse the crisis.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. Sweden emerges as possible US-North Korean summit host
  2. Google accused of paying academics backing its policies
  3. New interior minister: 'Islam doesn't belong to Germany'
  4. Hamburg 'dieselgate' driver wins case to get new VW car
  5. Slovak deputy PM asked to form new government
  6. US, Germany, France condemn 'assault on UK sovereignty'
  7. MEPs accept Amsterdam as seat for EU medicines agency
  8. Auditors: EU farm 'simplification' made subsidies more complex

Stakeholders' Highlights

  1. Counter BalanceConmtroversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  2. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  3. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  4. Martens CentreEuropean Defence Union: Time to Aim High?
  5. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  6. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  7. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  8. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  9. EPSUWill the Circular Economy be an Economy With no Workers?
  10. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  11. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  12. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework

Latest News

  1. Brexit and trade will top This WEEK
  2. Dutch MPs in plan to shut EU website on Russian propaganda
  3. Four years on – but we will not forget illegally-occupied Crimea
  4. Evacuated women from Libya arrive newly-pregnant
  5. Merkel in Paris for eurozone reform talks
  6. Commission rejects ombudsman criticism over Barroso case
  7. Western allies back UK amid Russian media blitz
  8. Meet the European Parliament's twittersphere

Stakeholders' Highlights

  1. Mission of China to the EUDigital Cooperation a Priority for China-EU Relations
  2. ECTACompetition must prevail in the quest for telecoms investment
  3. European Friends of ArmeniaTaking Stock of 30 Years of EU Policy on the Nagorno-Karabakh Conflict: How Can the EU Contribute to Peace?
  4. ILGA EuropeCongratulations Finland!
  5. EUobserverNow Hiring! Sales Associate With 2+ Years Experience
  6. EUobserverNow Hiring! Finance Officer With Accounting Degree or Experience
  7. UNICEFCyclone Season Looms Over 720,000 Rohingya Children in Myanmar & Bangladesh
  8. European Gaming & Betting AssociationEU Court: EU Commission Correct to Issue Guidelines for Online Gambling Services
  9. Mission of China to the EUChina Hopes for More Exchanges With Nordic, Baltic Countries
  10. Macedonian Human Rights MovementCondemns Facebook for Actively Promoting Anti-Macedonian Racism
  11. Nordic Council of MinistersGlobal Seed Vault: Gene Banks Gather to Celebrate 1 Million Seed Collections
  12. CECEIndustry Stakeholders Are Ready to Take the Lead in Digital Construction