Businesses are adapting to the geopolitical tensions. The Russian operations of Metro, a giant German supermarket chain, were hurt by Western sanctions over Crimea, then by Russia’s reprisal, when the Kremlin barred the firm from importing some fresh produce from the EU, America, Norway, Canada and Australia, recalls Martin Schumacher, Metro’s boss in Russia. Sales at its 93 shops began to dwindle in 2016 and fell in each of the next three years. But in 2020 they picked up again. Metro had found alternative suppliers in northern Africa, cut prices, spruced up its shops and offered its 12,000 employees better pay. “I am now confident about our opportunities in Russia,” says Mr Schumacher.
Far from cutting their Russian exposure, some German companies are increasing it. After an investment of €120m in 2015 Claas, a Westphalian maker of agricultural machines, is further expanding its production site in Krasnodar. Globus, another big German grocer, has managed to increase sales in Russia since 2016. It now employs 10,000 people in its 17 hypermarkets and last year invested €73m in a new logistics centre in Pushkino, near Moscow. Bionorica, a maker of plant-based medicines, recently finished building a €40m factory in Voronezh in central Russia. Knauf, a family firm that is world’s leading maker of gypsum boards with 4,000 workers at 15 factories in the country, is also planning to expand. Nikolaus Knauf, the firm’s 84-year-old patriarch, maintains a cordial relationship with Russia’s president, Vladimir Putin, whom he used to meet regularly.
Volkswagen, the biggest German company in Russia by sales, is also staying put. Its outspoken boss, Herbert Diess, is a vocal critic of Western sanctions, asserting that the carmaker does not want to be a “vehicle of government policy”. It plans to launch two new vehicles in the Russian market this year. The group has invested more than €2bn in Russia over the years. It directly employs 6,000 workers in two factories in Kaluga and Nizhny Novgorod. Russia is the third-biggest market worldwide for Skoda, one of its marques, and the fourth-biggest for its flagship VW brand.
In private, German managers grumble about obstructive Russian bureaucrats but praise regional governors and other members of the political elite as generally helpful (though would rather not discuss the subject of rampant corruption). Russia’s creeping authoritarianism is a worry. But German businesses can, like most Western ones, live with authoritarian regimes, as they do most notably in communist China. Many adopt Mr Diess’s position that “corporations cannot topple dictatorships”. They are more concerned about Russia’s own eastward turn.