Moscow's ambassador to Berlin explains the Eurasian Union has nothing to do with 'reviving' an empire or the USSR
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Originally Appeared at German Economic News. Translated from the German by Werner Schrimpf
Russia’s Ambassador to Germany, Wladimir M. Grinin, suggests a common economic and trade zone by the EU and the Eurasian Economic Union. Moscow is not interested in erecting a new Russian Empire; rather, it wants to improve relations to Europe. Grinin rejects ideas of a single state dominance, but favors the mutual respect of various interests.
Deutsche Wirtschafts Nachrichten: What is the impact of current EU sanctions on Russian corporations in Germany?
Wladimir M. Grinin: Before coming to details, I want to stress that the overwhelming damage of the EU sanction regime is the loss of mutual confidence among partners. Within months, the EU has destroyed the result of decades of hard work and effort on the part of our predecessors. In the past, Russia and Germany achieved a strategic level in this partnership, which manifested in a trade volume of 80 billion euros in 2012. Unfortunately, this positive and sustainable development was disturbed by worrying EU activities.
As you mentioned correctly, this negative impact hurts both parties – Russia and Germany. Just to bring up some examples: we didn’t see any single Greenfield project by Russian investors in Germany in 2015. And one should bear in mind that Russia represents – just after Switzerland – the second largest investor for these types of projects in Germany. Between 2008 and 2013, 63 projects of this type were initiated. The EU sanctions halted a positive development which could be experienced up to the year 2014.
Another example: in the course of our Russian-German partnership for development and modernization, a huge community of experts and consultants grew in Germany. These people are more or less unemployed today. In Hamburg, trade volume with Russia decreased by a record figure of 7.8 percent. The Hamburg-Russian economic council was forced to ask German government for compensation, for damages caused by the EU sanctions.
Deutsche Wirtschafts Nachrichten: What problems can German businesses expect, currently?
Wladimir M. Grinin: The problems can be easily recognized when reading German statistics. In 2014, German exports to Russia declined dramatically – by 18.1 percent or 6.5 billion euros. In absolute figures – the volume of German goods and services sold to Russia totaled 29.3 billion euros in 2014, compared to 35.8 billion euros in 2013. Trade volume between Russia and Germany for the year 2014 decreased by 12.09 percent to 67.7 billion euros, compared to 77.03 billion euros in 2013. From January to February 2015, German exports to Russia declined by another record figure of 34 percent.
Major branches of the German economy like machine engineering and car manufacturing were hit hardest. According to the data provided by the Union of European Economy, German car manufacturers had to accept a loss of 18 percent in cars sales to Russia, or 128.000 units, compared to the previous year. German companies operating in Russia are delaying projects and projections, and cutting the work force in Russia and in Germany. Polls among German decision makers show an increasing tendency to leave the Russian market. Nevertheless, just 3 percent of the enterprises engaged in Russia today took this last step and finally left the market, according to data from Russian commerce and registration authorities. The total number of German enterprises currently active in Russia has declined to a figure of 6,000.
According to results of recent polls among German businesses, three major steps would be necessary in order to improve German-Russian economic relations: first, to suspend EU sanctions; secondly, to stabilize and further reform the Russian economy; and finally, to make decisions in order to create a common economic and trade zone from Lisbon to Vladivostok.
Of course, Russia has now intensified its efforts to substitute imports with domestic products. A lot of efforts have been made to push towards domestic enterprises and entrepreneurs. This is a quite natural evolution, but it has obviously been accelerated by the EU sanctions. We do not intend at all to oust foreign companies from the Russian market. Quite the contrary is true. We do our best to create favorable conditions for foreign companies, especially those from Germany’s high tech sector. Let me mention new and innovative Russian public funds to support capital expenditures. Despite silly and false rumors spread in Germany, telling about Moscow’s plans to nationalize foreign assets, the Russian government is even prepared to guarantee the sacrosanct character of foreign capital expenditures in Russia. Conditions are worse for companies running their Russian businesses just from their home base in Germany. It is not a secret that German authorities create hurdles and obstacles; i.e., examining and inspecting export contracts are extra intense and extra time-consuming. The slightest suspicions of a potential “dual use”-character of goods to be delivered will knock out the respective contract and might lead to criminal prosecution to the supplier.
Deutsche Wirtschafts Nachrichten: What would be appropriate sources of information for German companies?
Wladimir M. Grinin: Your question makes absolutely sense. When just using German media, it is in fact difficult to get reasonable data and information about Russia’s economy and prospects concerning a potential cooperation. There is a campaign going on in German mainstream media to paint a gloomy picture of Russia and to demonstrate how unreliable Russia would be as a business partner. To mention an example, just the other day there was a cartoon printed in a German economic newspaper showing a crashing plane as symbol for Russian descending economy. Shown in this cartoon were German business people trying to leave the broken plane, but becoming aware that they did not have a parachute. To be honest, these journalistic practices seem rather odd to me.
To improve this situation, we are steadily organizing meetings with German business people in our embassies. Our representatives participate on a variety of events which are organized by German business associations. You will find current and day-to-day information about Russia at web sites of our embassies, the trade and economic office of Russian Federation in Germany, and the offices of the chamber of trade and industry of the Russian Federation. For detailed data concerning investment opportunities in Russia, please visit the web site at Russia’s agency for investments (www.invest-rf.com). St. Petersburg’s office for trade and economy is organizing meetings with German business representatives on a regular basis. Russian regions; i.e., Moscow’s local government, are running web sites for potential investors in the English language. A comprehensive information and database for all aspects of the Russian economy will be provided by the German-Russia chamber of foreign trade and committee for eastern businesses of the German business association. Additional information can be gathered from the German language branch of the TV station Russia Today.
Deutsche Wirtschafts Nachrichten: What benefits would you expect from a potential Eurasian Economic Union?
Wladimir M. Grinin: The agreements concerning the Eurasian Economic Union became effective on the 1st of January, 2015. The objective was to create an intense and comprehensive economic partnership among independent states – Russia, Belarus, Kazakhstan and Armenia. Kyrgyzstan is expected to follow later on. This model is anything but a revival of a Russian Empire, which is alleged by some critics here in Germany. The purpose of this union is to provide and support economic growth, increase of wealth, and to improve modernization and global competitiveness of member states’ economies.
In the process of establishing this economic union, we took into account our own experiences when integrating economic processes; that is, the GUS, the Eurasian Economic Union, the union on tariffs and customs, and additionally, the best international practices derived from the EU and WTO. A precondition of this Eurasian Economic Union is a deep and comprehensive relationship between founder states and future member states in terms of economy, social and humanitarian standards, and historical and cultural ties. If we have a look at the Ukrainian case, where our western partner requested a strict “either-or” decision from the Ukrainian government whether to join EU or Eurasian Economic Union, we can see what has been destroyed in an attempt to cut traditional grown economic and historic ties between Ukraine and Russia. We are convinced that both models – EU and Eurasian Economic Union – do not compete against each other, but would form an ideal complement.
The advantages for German corporations interested in cooperating with Eurasian Economic Union are apparent. The German economy would get access to a huge market comprising of approx. 180 million consumers with free trade and free exchange of products, services, capital and labor force. The Eurasian Economic Union ensures common and transparent standards for investments and a standardized sphere of customs and tariffs.
Some partner states are interested in making use of the advantages of this Economic Union starting today. Various preferred partner agreements have been drafted and filed. A potential agreement concerning a free trade area with Vietnam has reached the final stage and should be signed soon. Similar talks are going on with Israel, India, and Egypt.
To put it in different words, when creating this Eurasian Economic Union, it was not our intention to separate from other states and unions. We are following an integrative and proactive agenda. We do not insist on creating an exclusive circle and we will respect economic interests of other states and vice versa. We are expecting that our interests will be obeyed in terms of international trade and economic exchange.
The Eurasian Economic Union is prepared to establish a common economic and humanitarian zone together with EU. All necessary steps have been taken based on WTO standards. We would be glad if the EU could agree on this concept. The issue was addressed during the 3rd East Forum in Berlin on the 22nd of April this year, and Chancellor Mrs. Merkel as well as Vice Chancellor Mr. Sigmar Gabriel showed basically a positive attitude towards the project.
Deutsche Wirtschafts Nachrichten: What is the main focus of Russia when cooperating with Germany in the area of energy supplies?
Wladimir M. Grinin: For us it is important to ensure and to understand that Germany remains a reliable partner and customer for Russian energy supplies. In Germany, there is an ongoing discussion about the future role of natural gas in the energy mix of this country. It showed that long term supplier Gazprom has become a pawn in the hands of politicians. Interested parties are trying to discredit Gazprom as unreliable and unpredictable. Brussels adopts a policy of double standards towards Gazprom which became visible during the implementation of the 3rd energy agreements. Unfortunately, the EU still follows this strategy, and on the 22nd of April, 2015, European Commission accused Gazprom of unfair competition in Eastern Europe. Gazprom rejected all these charges.
Nevertheless, we are still prepared to continue and enhance cooperation in the field of energy with Germany and EU, and to continue cooperation with German energy groups under the condition that trade and economy are not misused for political reasons. With respect to Germany and its planned energy transition – the so-called “Energiewende” – natural gas will continue to play an important role in any future energy mix. A development path towards a post carbon future without the usage of natural gas is hard to imagine.
In this context, I would like to stress that long term cooperation in the area of energy between Europe and Russia will be supported on all political levels. Russia is and will remain a safe and reliable supplier of these important commodities.
On the other hand, we have to bear in mind the constraints in the field of energy production. Exploration of natural gas requires huge capital expenditures and a long term time schedule in order to secure invested funds. We are confused by an ongoing discussion and demands for a unified standard prize for natural gas and the alleged necessity to reduce dependency from Russian supplies.
Concerning the common decision of Gazprom and the German group BASF to postpone a planned swap deal of enterprise shares, which was described as a change of the Gazprom strategy in German public discussions, I have to assure you that this decision had nothing to do with politics. This deal had been already approved by authorities of both countries and the European Commission. However, intense internal discussion brought the management of Gazprom to the conclusion to skip a strategy of attaining direct access to end customers. In the same context, one can see the decision of Gazprom to divest its shareholding in “Leipziger Verbundnetz Gas,” a gas supplier in Eastern Germany.
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