Vladimir Bespalov: Germany Shall Maintain Neutrality about Presence of Russia in Arab States

By Vladimir Bespalov

Expert-germanist Vladimir Bespalov analyzed economic relations of Russia and Germany as the ground of political dialogue for “NewsBalt”. 

 

An expert-germanist, analytical expert of Baltic regional information-analytical center of Russian Institute of Strategic Studies Vladimir Bespalov analyzed economic relations of Russia and Germany as the ground of political dialogue for “NewsBalt”.

 

Impressive Dynamics 

 

General development of the world economic process for the last two years has set the ground for motivation of German establishment to proceed active cooperation with Russia. In 2010-2011 Germany faced serious economic troubles, associated with the attempts to preserve European currency, as well as reduction of export order from European partners, particularly Greece and Portugal, which to a definite extent influenced the load of significant number of German enterprises. 

 

As a result, the main agenda for the ruling party CDU/CSU is focusing on internal domestic issues, which is significantly complicated with the fight of the ruling party for the unique European currency preservation. This circumstance has conditioned also the priorities within the foreign policy of German Government – reformation of the Eurozone, as well as maintenance of cooperation with Russia in the sphere of energy and growing trade.

 

In recent years, Russian-German economic relations have been marked with impressive dynamics. Despite sufficient reduction under the influence of general recession of the world economy in 2008-2009 of mutual goods turnover between Russia and Germany (according to approximate estimations, 40% of pre-crises level in 2008), Germany remains to the biggest foreign trade partner of Russia. The years of 2010, 2011 and 2012 demonstrated confident gradual growth of mutual goods turnover – in average for 26.5% - 35% annually. The general share of Germany in foreign trade turnover of Russia comprises 8.5%.

 

According to the Federal Service for State Statistics of Russia, the goods turnover with Germany comprised 71.8 billion USD in 2011, which is 37% higher than the value of 2010 (51.8 billion USD). Such growth of the goods turnover gave German experts the ground to name 2011 a record year. Despite crisis phenomenon in Europe, trade turnover between Russia and Germany keeps on growing and there are prerequisites that (according to statistics) by the end of 2012 it shall reach about 100 billion USD. Unfortunately, Russian statistics yet hasn’t calculated the final amount (the data shall be available only by the end of the 1st quarter of 2013), but for three quarters of 2012 it comprised 67 billion USD.

 

Finally in 2011 in Russia worked about 6.5 thousand companies and enterprises with German capital share, including about 1400 joint Russian-German companies and about 800 companies with 100% German capital. The turnover of these companies is more than 40 billion Euro.

German companies have created more than 100 000 workplaces.

 

The most famous German investors in real economy sector is “E.ON” (electric energy) – more than 5 billion Euro; “Knauf” (building materials manufacturing) – about 1 billion Euro; company “Metro”, comprising more than 60 hypermarkets in Russia – approximately 500 million Euro; group of companies “Volkswagen”, which in October 2009 launched a full-cycle of car’s production – 570 million Euro.

 

For the date of January 1st, 2012 according to the scope of accumulated in Russia foreign investments (28.7 billion USD, including direct  ones – 11.3 billion USD and others – 17.3 million USD) Germany remains to be one of the biggest investing states, giving the way, considering well-known reasons, Cyprus, the Netherlands and Luxembourg. For the same period approximately 2 billion USD of Russian investments flew to Germany.

 

Company “BASF Societas Europaea” –the biggest chemical group of companies in Germany and in the world, the participation of which in domestic activity of the Russian Federation is of strategic economic character for Germany. The scope of sales of the Group within the territory of Russia and the CIS states by the beginning of 2012 reached unprecedented value for the company of 1.1. billion Euro including oil and gas projects.

 

Oil and gas direction is the most promising and profitable for the Group BASF and mainly at the cost of the scales of oil and gas projects, influencing in recent years foreign policy motivation of the main representatives of German political beau monde. For Germany the issue of gas becomes topical in respect with the need to make up in future losses in energy, related to gradual decommissioning of nuclear power plants.

 

In March 2011 BASF continued further expansion into the market of Russian energy resources – in presence of the Chairman of the Russian Federation’s Government Vladimir Putin. The Chairman of the Board of Directors of OAO “Gazprom” Aleksey Miller” and the Chairman of the Board of Directors of “BASF SE” Jürgen Hambrecht have signed a memorandum on mutual understanding in relation to the “South Stream” project, providing joining of “Wintershall Holding GmbH” to the accomplishment of the sea-part of the project.

 

The document defines the key conditions and principles of participation of German company in the sea part of the project. In particular the Memorandum specifies that the participation share of “Wintershall Holding GmbH” in the company “South Stream AG” shall comprise 15% with preservation of 50% of the interest by “Gazprom”. The Memorandum also stipulates conclusion of new long-term contracts on natural gas supplies by the joint company “Wintershall Erd gas Handelshaus Zug AG”. In December 2011 the Parties confirmed the intention to accomplish the project in due terms.


Competition Threat of Qatar 

 

It’s worth to note that last year this joint German-Russian project faced a potential threat of competition from Qatar. Begun between 2008-2010 extremely aggressive interventions of Qatar within European gas market, from time to time close to price damping, its plans to construct a number of factories in regasification of condensed natural gas (CNG) in South of Europe (Albania, Greece, Turkey, Ukraine) are a threat for the “South Stream” project. It is planned that the CNG factories of Qatar shall locate south to the Russian “South Stream”, that is why the emirate shall be able to introduce to the markets its cheaper CNG, turn it into gas and fill the “Nabucco” pipeline (alternative to “South Stream”) or sell it at spot-markets.

 

Such development of events can heavily affect the investments, which German companies (BASF, Wintershall) have already invested into Russian gas projects. We may assume potential blocking of Russia and Germany on the issues, related to price regulation within gas market and, at least, German neutrality within foreign political issues, related to the presence of Russia in a number of Arab countries.

 

Active presence of Germany in Russian fuel-energy complex has a parity ground. Russian “Gazprom” and “Wintershall” yet since 1990 have been dealing with gas trade in Germany and other European states (in the frames of a joint company “WINGAS GmbH&Co KG”). Since then approximately 3 billion Euro have been invested into the establishment and extension of gas transporting infrastructure and construction of underground gas storages. In December 2012 ‘Gazprom” and German Group BASF signed a legally binding treaty on assets exchange. According to the conditions of the deal “Gazprom” shall get currently BASF’s share of 50% in joint companies of WINGAS and WIEH, dealing with gas trade and its storage.

 

Total supplies of Russian gas in Germany under the line “BASFAG”, “E.ONAG” and “VerbundnetzGas AG” comprise more than 40% of all gas supplies in Germany. In 2011 according to the body “Gazprom export”, Germany obtained 

34,02 billion cubic meters, having taken the 1st place (the 2nd – Norway (30 billion cubic meters), the 3rd – the Netherlands (2 billion cubic meters).

 

Thus, the interest of Germany in keeping developing more close economic relations with Russia mainly is conditioned with pretty pragmatic consideration. Considering that for Germany energy partnership with the Russian Federation is strategic, and significant number of contracts in Germany this or that way is related to “Gazprom” and its affiliates, then for Germany the return in 2012 of Putin to Presidential post and continuation of a former foreign political line is observed exactly within the context of continuation of energy relation of Germany with Russia.


What Shall happen after the Parliamentary Elections in 2013 

 

Prolongation of active interstate contacts and former foreign political course are supported in Germany by the circles oriented at “Gazprom”.  First of all, these are the lobbyists of those businessmen who have close contacts with CDU (BASF) and SPD (automobile industry). It’s worth to note that also those companies having big contracts in such powerful infrastructural projects as Sochi-2014, also shall support preservation of the former foreign political course,  which shall allow reducing critical rhetoric towards domestic Russian political process, with the aim of reduction of potential risks which can be induced by political instability in case of protest growth.

 

It’s quite nice, that the biggest informational-analytical magazine of Germany ”Spiegel” in December 2011 noted that “Germany is the second after China significant trade partner of Russia. The country is a giant market – however, the success chances for foreign companies are defined, first of all, with political framework conditions…and in the focus of German business is still the oncoming return of the current Prime Minister Putin to the Kremlin. The opposition would prefer to interfere with Putin’s plans, however foreign investors observe risks more likely within political turbulences”.

 

Thus, too active rates of penetration into Russian market precondition close binding of a broad spectrum of German economic elites, influence the opinion of a number of political activists of Germany, in particular, even on such active adherents of foreign- and domestic political changes in Russia as FDP.

 

It’s important to note that in oil-chemical and gas sphere the group of companies “E.ON”, the group of companies “BASF” and its affiliates have bigger projects in Russia and the most close relations with Russian political beau monde which is a powerful lobby of “Gazprom” interests. Considering that the representatives of ”BASF”, which are accomplishing the biggest Russian-German energy projects are tightly connected with the ruling party CDU/CSU and almost to the same extent with SPD, i.e. two biggest parties of Germany, we can dwell on gradual reduction of political demands for radical changes within interstate dialogue.

 

Foreign policy speaker of the “Green” party Marieluise Beck in summer 2011 stated that “Gazprom” differs from western companies, as it is more than a simple connection of policy and business: it helps Moscow to accomplish foreign policy by granting more beneficial contracts to European energy companies. Subsequently, the top officials in these companies are acting as the Kremlin’s lobbyists, forcing their national authorities to place the interests of their countries higher than the interests of the common European energy strategy.

 

It’s urgent to note that almost all big companies of Germany have political lobby through these or that party structures.

 

The SPD representatives have close contacts with the Group of companies “Volkswagen Group”, accomplishing now the biggest projects in automobile industry in Russia.

 

Therefore, by any domestic political situation in Germany after the Parliamentary elections of 2013 (victory or loss of CDU and coming to power of SPD) by the main compound of Eastern foreign political logic Germany shall not undergo sufficient changes, and mainly shall even enhance the interpenetration of the both economies.

 

 

Translated by EuroDialogueXXI from newsbalt.ru

 

 

 

 

20.03.2013

 

 

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