Germany’s investors are souring on Russia, and not just because of sanctions, the New York Times reports:
The uncertainty hanging over Germany’s strong business ties with Russia, which are more than double the value of Russian trade with the United States, is in marked contrast to the optimism and relative stability of recent years. And it has been reflected in increasingly acrimonious exchanges in Germany’s political, diplomatic and intellectual elite over how to shape relations with Moscow. […]
“Sanctions are not the proper means to resolve this political crisis,” Eckhard Cordes, a former Daimler executive who is chairman of the Committee on Eastern European Economic Relations, which represents companies doing business in the former Soviet bloc, said in an email. “The West cannot have an interest in destabilizing the Russian economy or Russian politics.”
But sanctions are hardly the only factor destabilizing the Russian economy. Well before Russia annexed Crimea, German businesses had become disenchanted with what they saw as increased hostility to foreign investors.
[…] 41 percent of German companies in Russia have slowed investment there, according to the survey of 200 firms by the chamber of commerce, while 36 percent said they would cancel projects unless conditions improved. And 28 percent said they planned to dismiss Russian workers.
The Russian market has turned sour for German automakers. Opel said in September it would cut production at its main factory in St. Petersburg, where it makes Opel Astra and Chevrolet Cruze cars, eliminating a shift and 500 out of 1,600 jobs.
There has a lot of talk about sanctions, and a lot of noise in Europe about rolling them back and/or ending the confrontation with Russia. But Western sanctions are not the big factor causing German companies to reduce their investments in Russia. It is the increasing uncertainty over the rule of law, economic policy and the future of the country under Putin. The collapse in oil prices makes Russia much less interesting as a market; questions about how the volatile Putin will respond add an additional layer of uncertainty—as does the clear way the Russian government intervenes on behalf of privileged Kremlin cronies in business disputes.Russia’s strongest card in the West is the optimism of German investors in the country; that optimism is dwindling and, sanctions or not, investment in Russia is likely to slow—and the impact of Russian apologists and sympathizers on Western policy deliberations is likely to shrink as well.