Despite the war in Ukraine, German companies continue to be active in Russia. However, withdrawing comes with enormous risks. They are even threatened with expropriation.
Moscow – German companies that do business in Russia despite the war in Ukraine are faced with a difficult decision: either they pay money into the Russian treasury or they face the consequences of Vladimir Putin. However, turning away is not impossible. “If German companies withdraw from Russia, there are a whole host of enormous risks,” explained Prof. Dr. Viktor Winkler, an expert on sanctions, in conversation with
Ippen.Med
ia.
A major problem is the risk of expropriation. “The Russian government has passed a law that requires a discount of around 50 percent on the purchase price of the company being sold. A withdrawal that is too hasty, or a withdrawal at all, always runs the risk of Russian expropriations,” said Winkler.
German companies must consider risks when withdrawing from Russia
There is also a risk that by withdrawing, companies will expose their employees, whether permanent or not, to government measures. As employers, companies have a duty of care, especially towards their employees abroad.
But these are not the only risks. “Anyone who withdraws from Russia runs an enormous risk of selling the company directly or indirectly to someone in Russia who is either sanctioned or who is not allowed to have it at all because of the sanctions,” warns Winkler.
Putin can benefit from the withdrawal of German companies from Russia
The probability that something is sanctioned in Russia is now higher than that it is not sanctioned. “Russia has the most sanctioned environment in the world. It is estimated that 50 to 60 percent of all our sanctions measures from the EU directly or indirectly affect the Russian state.”
A withdrawal of German companies could also benefit the Russian economy and would thus undermine the effect of Western sanctions. “If you ask a company to withdraw from Russia and, for example, 70 percent of the production that is stopped goes to the Russian state or to the Russian economy, exactly the opposite is achieved.” The sanctions are actually intended to to prevent Russian economic growth or at least not to contribute to strengthening the Russian economy.
According to Winkler, a withdrawal from Russia is still possible legally. “It’s wrong to say it doesn’t work at all. But it is also wrong to say that it is easy because the dangers outweigh the risks. The public generally imagines the exit to be far too easy and unfortunately idealizes those companies for their quick exit.”
Since the Ukraine war, many Western companies, including large ones like Siemens, VW and Mercedes, have withdrawn from the Russian market. Companies from the financial sector such as Deutsche Bank, from retail such as Deichmann and from the technology and telecommunications sectors have also taken this step.
Some German companies are still active in Russia – despite sanctions
But there are still many companies doing business in Russia, including Hochland, Metro and Ritter Sport. Companies in the retail, consumer goods and health sectors have so far been exempt from international sanctions.
There were even allegations that German companies were circumventing the Russia sanctions. However, Winkler is not aware of any cases in which German companies avoid sanctions through loopholes. “I can only strongly advise against using such supposed 'loopholes',” said the expert.
German companies are said to be involved in the development of Mariupol
Recent research by the ARD magazine
Monitor
has shown that German companies were even involved in the reconstruction in Mariupol. Despite sanctions, 4,000 Knauf people still work in Russia. The company has since rejected the allegations.
“The fact that the public is putting pressure on the Knaufs case is understandable, but not very effective,” said Winkler. “So far, the crucial legal question has not been asked, namely: What measures has Knauf introduced to get the massive sanctions risks and international criminal law risks under control? I haven’t heard anything about this from Knauf yet.”
The second company that is the focus of the research is WBK Systems GmbH, based in North Rhine-Westphalia, which also has a Russian branch and specializes in equipping companies for the production of building materials. Both companies are said to be active in Mariupol for Russia.