Mecklenburg-Vorpommern Economy

The Germans brace themselves to sever ties with Russia

German business leader Michael Harms once stood by Russia through thick and thin.

As head of the German-Russian Chamber of Commerce in Moscow, he promoted relations even after Moscow annexed Crimea in 2014. As Managing Director of the Committee on Eastern European Economic Relations, he supported the Nord Stream 2 pipeline between Russia and Germany, which has since been shut down.

But when Russian President Vladimir Putin launched an invasion of Ukraine last month, Harms knew the work that had shaped his career was over.

“It’s a terrible emotional situation when I see people die in countries I know very well. . . Professionally, I’ve dedicated most of my life to these relationships,” he told the Financial Times. “When you see that this effort was somehow in vain, you feel personally deeply affected.”

German business bosses like Harms have been driving the government for a long time Change through Handel — Change through trade — Strategy for cooperation with Moscow. Critics argued these ties — and a desire not to damage the economic interests they forged — had made Berlin too soft on the Kremlin.

Michael Harms, chairman of the Committee on Eastern European Economic Relations in Germany, considers trade relations with Russia to be even more important in the long term © Anton Novoderezhkin/TASS/Reuters

But as public outrage over the invasion mounted and the German government joined the international push to isolate Russia through sweeping sanctions, including the suspension of Nord Stream 2, trade between the countries has come to a near halt.

According to the Association of German Chambers of Industry and Commerce (DIHK), around 3,650 German companies were active in Russia before the Ukraine war. According to the Bundesbank, they invested 25 billion euros in the country by 2019 and employed 280,000 people there.

Before the war, hundreds of thousands of containers were moved between Russia and the German port of Hamburg every year. In the past few days, the number of movements has “gone to zero,” DIHK foreign trade chief Volker Treier told journalists last week.

Despite the sudden major commercial losses and disruptions, Treier said, “we haven’t heard a single critical voice from German business arguing that the sanctions are wrong.”

The unbundling of business ties will be painful for both countries, with partnerships in areas ranging from car manufacturing to IT to agriculture. According to official figures, Germany imported goods worth around 33 billion euros from Russia last year, while its exports to the country were just over 26.6 billion euros.

Germany is more than 55 percent dependent on Russia for gas imports, half of its coal and 35 percent of oil and has so far rejected the idea of ​​an embargo on the country’s fossil fuels.

The two countries also have strong academic and cultural ties that are particularly valued in East Germany, where five states once made up the German Democratic Republic, which lay on the Moscow side of the Iron Curtain. Since the collapse of the Soviet Union in the early 1990s and German reunification, East Germans have taken an open stance towards Russia.

To her, “Russia was a great power, but a friendly great power, just like the US was to me as someone I grew up in [former] West Germany,” said Oliver Günther, President of the University of Potsdam, which has ended more than a dozen academic and research ties with Russian institutions in the past few days.

Many faculty members of the East German university have been running exchange programs with Russia for more than three decades and experience the break as a personal and professional blow.

“There was a good tradition and that hurts even more,” said Günther. “For these East Germans, it’s a completely different memory. . . And that leads to a kind of cognitive dissonance.”

Günther also pointed out the impact on scientific research. Major projects that have been halted include collaboration between DESY, Germany’s largest particle accelerator research center, and Russian institutions – a step never taken even during the Cold War. Cooperation between health authorities and researchers from the Koch-Mechnikov Forum, which was working to bring Russia’s healthcare system in line with EU standards, has also been suspended.

Not only well-known companies and research centers are affected by the separation.

Cities like Hamburg and Emden are announcing the status of a “twin city” with their Russian counterparts. Local politicians have quit the small Baltic Sea Foundation – a climate protection fund whose original foundation delivered the first Nord Stream pipeline to compensate for environmental damage. And in Frankfurt, German banks including Deutsche Bank and ING stepped in to fund a local ice hockey team after it ended a sponsorship deal with Russia’s state-owned VTB bank.

Unlike in previous rounds of sanctions or periods of tension with Russia, many prominent so-called Putinunderstandr, or “Putin sympathizers” — as critics describe those too close to the Russian leader — have withdrawn from organizations with Russia ties or denounced the invasion.

Manuela Schwesig, Prime Minister of Mecklenburg-Western Pomerania, sits with Russia's then Deputy Trade Minister Vasily Sergeevich Osmakov at the state's 2018 Russia Day.
Manuela Schwesig, Prime Minister of Mecklenburg-Western Pomerania, sits with Russia’s then Deputy Minister of Trade Vasily Sergeyevich Osmakov at Russia Day 2018 © Bernd Wüstneck/dpa

Manuela Schwesig, Minister-President of the state of Mecklenburg-West Pomerania in north-eastern Germany, where the first Nord Stream pipeline and Nord Stream 2 are being built, once defended the region’s “Russia Day”, established to promote economic ties the same year Moscow Crimea annexed .

Schwesig has now canceled the event and tweeted that it was clear that the Ukraine conflict had “fundamentally changed” German-Russian relations. “We all hope for a speedy end to the violence,” she wrote. “However, after that, our relationship with Russia will not be the same as it was before.”

Harms agrees: His committee now plans to support companies looking to invest in Poland or Central Asia. It will also try to maintain ties with Ukrainian companies and help some move to Germany.

However, not all German companies completely withdrew from Russia, Harms noted, and part of him still believes in the era of Change through Handel is not quite over yet.

“In the short term, it is true that economic cooperation cannot prevent terrible political developments,” he said. “But a lot of trust has been built. . . In the long term I think [Wandel durch Handel ] becomes even more important.”