Translated by Ollie Richardson for Fort Russ
13th January, 2016
The Union of German machine builders and equipment manufacturers began negotiations with Sberbank with the aim of finding solutions to financial problems of projects that implements German business in Russia. As was reported by “Izvestia”, according to the Press Secretary of the Union Holger Paul, the negotiations are still at an early stage. Perhaps the representatives of the Union will ask the Russian state bank to revitalize lending to Russian-German projects in engineering, considering that many of them can’t get financing from German banks.
According to Holger Paul, German mechanical engineering exports to Russia fell in the first nine months of 2015 by 26.7%, compared to 2014 – €3,582 billion. Russia moved up to 10th place (fourth in 2014) in the list of countries to which Germany exports engineering products.
Exports of German machinery to Russia fell in 2013. Last year exports amounted to €6,484 billion, a decrease compared with the previous year by 17%. In 2013 it was €7,813 billion, a decrease of 3.5% compared with 2012. In 2012 the figure was €8,095 billion (an increase of 7.6% compared with 2011). This data was presented in the presentation of the Union (at the disposal of “Izvestia”).
According to German manufacturers, one of the main reasons for the reduction of German exports is not so much the sanctions imposed by the West against Russia because of events in Ukraine, but the declining world oil prices, the consequent weakness of the ruble and the economic crisis.
In these circumstances, the purchase costs of imported equipment to Russian enterprises is expensive, and loans under high interest rates becomes unprofitable. Holger Paul refused to predict how it will change the figures of the decline in exports of mechanical engineering by the 12 months of 2015, as well as to comment on the question of how many Germans might lose their jobs due to the fall in exports to Russia.
The enterprises of machine-building complexes employs nearly a million German citizens. However, according to the Union, about 17% of German firms have already cut staff in Russia.
In the Russian-German chamber of Commerce it was reported that after the entry of sanctions German banks are more carefully checked by the participants of credit transactions. The representative of the bank Kfw IPEX-Bank, who gave loans to the construction of a gas pipeline from Russia to Germany Nord Stream, Axel Breitbach, told Izvestia that the organization lends to Russian companies purchasing the products of German engineering.
According to him, it is necessary that financing of projects belongs to those areas in which the bank operates (the extraction of raw materials, energy, aeronautics, land transport, social infrastructure — are listed on the Bank’s website), and that the business is able to service a loan.
“Since the beginning of the sanctions we observed among the participants a growing uncertainty about the impact of sanctions on basic relations between economies. Because of this uncertainty the number of funding requests has declined from the Russian partners and the European and German investors and exporters”, says Breitbach.
Representatives of the Hypovereinsbank and Commerzbank declined to comment. Representatives of Deutsche Bank and of the Association of German banks have also not responded to the requests of “News”.
According to German media, the largest amount of loans provided to clients in Russia was by Commerzbank and Deutsche Bank (more than €5.4 billion and €5.2 billion respectively, approximately €1.7 billion was accounted for by Hypovereinsbank), and overall debt of Russian entrepreneurs to the German banks at the end of October 2014 exceeded €13 billion.
Experts interviewed by “Izvestia” noted that because of political risk, access to foreign funding is limited to all Russian banks and not only the largest that came under Western sanctions.
“The financing of projects in Eastern Europe for German banks is problematic due to large political risks. Loans in Russia for businesses in comparison with the conditions of German banks are unattractive because of high interest rates and instability of the ruble. The solution to this problem is possible only at the political level (guarantees, support for investment, etc.)”, said a source in the German banking industry to “Izvestia”.
The limit to the crediting of projects connected with Russia has hurt German engineering, experts say.
“With sound mind and memory, no German banker would take the risk to give a loan to a company in Russia. And if you still will, then such a loan will cease to be interesting. It is pointless to lend against assets that are in Russia. If Russian companies have assets abroad, you can take the credit. It is also possible that foreign “daughters” of the Russian Bank will give a loan to the Russian company,” a source in the Russian banking industry said in an interview with “Izvestia”.
The savings bank were unable to provide comment to “news”.