For German firms, relations with Russia are personal, not just financial.

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For German firms, relations with Russia are personal, not just financial.

BERLIN – When Peter Fenkel heard that Russia had invaded Ukraine, he said that his first thought was not for the business that his German company stood to lose in any country, but for its employees in the region. To luck, those years of business deals and shared drinks had become more than just coworkers.

“These are more than just business relationships, they’re real friendships,” said Mr. Fenkel, the company’s CEO, a manufacturer of industrial fans. “We’re sitting next to each other in meetings, drinking beer together.”

The family-owned company, Ziehl-Abegg, has 4,300 employees, and Mr. Fenkl recalled how teams from Germany, Russia and Ukraine worked side-by-side, on business trips and during trade fairs where Ziehl-Abegg sold its wares. will perform. ,

Now in Ukraine, all four employees of the company have taken up arms to defend their country. In Russia, where the company has a production facility and employs 30 people, business has come to a standstill.

Mr Fenkel said he spoke several times with the manager of his company in Russia last week, trying to figure out how to proceed as the gravity of the situation became clear.

“Twice I called a colleague in Russia and he couldn’t talk,” said Mr. Fenkel. “He kept on shedding tears.”

German companies do far more business in Russia than any other EU country, exported goods worth more than 26 billion euros ($28.4 billion) last year (Poland was second with €8 billion) and There was an investment of €25 billion in operations. This commitment to the Russian economy reflects, in part, an ethos embraced by former West Germany coming out of World War II – that trade could ensure peace and prevent Europe from descending into another war.

Russia’s annexation of Crimea and subsequent sanctions in 2014 led to a third drop in the number of German firms investing in Russia. Still, by 2020 that figure was just under 4,000 companies, leading many to believe their presence could help anchor Russia in the democratic sphere.

On February 24, that confidence collapsed, forcing companies of all sizes to contemplate what to do next.

While some have announced exit decisions and began severing business ties, others are trying to stay out of loyalty to their employees, despite Western sanctions that have restricted banking and cross-border transportation. has created major obstacles for, and the downfall of, the ruble. What remains for many businesses is a deep sense of hopelessness, coupled with disillusionment.

Germany’s leading automaker – BMW, Volkswagen, mercedes benz and Daimler Trucks — all announced last week that they were halting their exports and production in Russia. Family-owned companies are doing the same, including car parts maker ZF Group and Haniel, which manages several independent businesses in the country.

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“While our options are limited, we may still be impacted,” Haniel chief executive Thomas Schmidt said in a video statement. “I understand it’s difficult from a customer and supplier relationship standpoint, but it’s more important that we ask people to protest on the street.”

This sentiment is also coming from the German Eastern Business Association, a group of companies that for decades has been a cheerleader for deep economic ties with Moscow, even as President Vladimir V. Even in the face of increasingly anti-democratic moves by Putin. The group celebrates its 70th anniversary this year, and many of its members were earlier scheduled to meet with the Russian president in Moscow last week. The journey was abandoned after the invasion.

Oliver Hermes, president of the trade organization, said, “We should call a spade a spade: it is less about sanctions and their consequences at present, than about the question of whether we will have significant economic ties with Russia in the future.” ” , In 2014, the group campaigned against severe economic penalties for Moscow, but this time it was different.

“The sooner the Russian government stops this war, the more ties can still be saved,” Mr Hermes said. “There is no doubt that the German economy will support the sanctions imposed.”

Years ago, Martin Deler, chief executive of Seebacher, a maker of specialized lighting controls, had no interest in investing in Russia. But it is a huge, lucrative market for products developed by his family-owned company based in Bad-Tolz, and when a Russian manager left a rival company and approached him about setting up a Russian division, he called it Decided to give try.

This was just before the outbreak of the coronavirus pandemic, but this year the business started to pick up pace. Then came the attack.

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“Now, we’re thinking about what we should do. Cut off contact and let him go,” said Mr. Daler, whose company has annual revenues of €2.5 million. “From a financial point of view, it will not be as dramatic for us. But he is the father of three children and the whole family is dependent on his job.”

It is not only small companies that are facing tough decisions.

Wintershall Dea, a German oil and gas company with a global portfolio of projects, canceled its annual company news conference, which was to be held on February 25, the day after the invasion. Instead, its leaders issued a joint statement on March 2 expressing concern over the war.

“We have been operating in Russia for over 30 years. Many of our partners work on a daily basis with our partners in Russia in other locations as well,” it read. “We have forged many personal relationships – including with Gazprom Our joint ventures are also included,” the state energy giant of Russia.

“But the Russian offensive war against Ukraine marks a turning point,” he said. “What is happening now is shaking the foundation of our cooperation.”

The company separately said it would stop payments to Russia and write off its €1 billion investment in the unfortunate Nord Stream 2 natural gas pipeline linking Russia and Germany, which Berlin’s government suspended on 22 February. Had given. It also receives no revenue from its oil and gas operations in Russia, which accounted for about a fifth of its operating profit in 2021.

Not every German company is exiting. Metro, a wholesale food company with 93 locations in Russia, which had revenues of €2.4 billion last year, said it had decided to continue operations out of concern that the exit would disrupt food supplies to the population. “None of our 10,000 employees in Russia are personally responsible for the war in Ukraine,” the company said in a statement.

Metro said it was also trying to operate some of its 26 stores in Ukraine based on the security situation, and was supporting efforts to provide those who were forced to flee their homes went.

Beyond the impact of companies investing in Russia, analysts predict that rising energy and food prices as a result of the war will hurt the broader German economy. Since the invasion, politicians have been rallying the public to see their sacrifices through a wider lens.

“My country, Germany, will be the country that bears the brunt of the sanctions adopted by the European Union and the United States,” said Emily Haber, Germany’s ambassador to the United States. said on twitter, “We are ready to bear the burden. Freedom is priceless. ,

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