Russia Remains A Top Investment Location For German Businesses

Russia remains one of the top investment destinations for German businesses, despite tensions between Washington and countries facing steep sanctions, including the European Union.

Within the first quarter of 2019, foreign direct investment by German businesses in Russia has seen a 33 percent increase compared to the same period a year earlier, totaling €1.76 billion ($1.98 billion), according to a statement released by the Russian-German Chamber of Commerce.

“Despite weak market conditions, German companies continue to believe in the Russian market,” said Matthias Schepp, the chamber’s chairman, on Thursday, highlighting the upward trend of German business in Russia.

Although the Russian economy was at a standstill from 2014-2018 mainly due to sanctions that had been imposed over the Ukrainian crisis in 2014, Germany has remained a stable business partner. Europe’s largest economy has 10 times more companies registered in Russia than the other European Union states, accounting for nearly 4,500 companies.

“Despite Western sanctions along with Russia’s retaliatory measures the volume of investments by German corporations into the Russian economy last hit a record high in 2008,” the German trade lobby said in April.

The weakening of the Russian ruble after 2014 only raised the interest of German businesses looking to invest in Russia.

Germany’s interests in Russia mostly stem from the country’s large oil and gas reserves. Apart from substantial investment in projects such as the Nord Stream 2 natural gas pipeline, which is supposed to double Russia’s gas exports to Germany via the Nord Stream route, Russia offers opportunities for German small and medium-sized businesses.

“Companies that are well aware of the Russian market are not in a hurry to be afraid of sanctions and political problems,” said Schepp.

Last month the top German companies expressed their intention to invest €395 million ($444 million) in Russia.

“The readiness to invest among the interviewed companies rose by almost one quarter compared with December 2018,” the German trade chamber’s April statement reads. “As many as 39 percent of respondents plan to invest in Russia within the next 12 months against 30 percent in December.”

Three-quarters of foreign direct investment stocks in Russia come from EU member states, according to data released by the European Commission. Last year the volume of accumulated investments from EU countries to Russia amounted to €300 billion ($336.4 billion) according to Russia’s Industry and Trade Minister Denis Manturov.

“This shows that the European business is interested in coming to our country, investing its funds in the development of its business,” TASS quoted Manturov as saying at a meeting with European business representatives in Moscow in March.