German businesses fleeing Russia as threat of sanctions mounts

Large European businesses continue to reduce their presence in Russia against the backdrop of a stagnant economy, falling incomes and sanctions that cut off the country from capital markets and modern technologies.

Over the past 10 years, the number of German companies operating in the Russian Federation has decreased by 42%, Deutsche Welle reports quoting the data of the German-Russian Chamber of Commerce (AHK).

Of the 6.3 thousand German companies that invested in the Russian economy in 2011, 3651 remained by the end of last year.

Over the past year, about 300 more German companies left Russia, which reduced their total number by 8%.

The reason is, among other things, the tense situation around Ukraine and the risks of sanctions that businesses want to avoid, said Matthias Schepp, Chairman of the Board of AHK.

Another obstacle to the comfortable work of German businessmen, according to Schepp, are the health requirements, mandating that foreigners and their family members over 7 years old undergo a mandatory medical examination.

Visitors to Russia for a period of three months or longer are required to provide the Russian Ministry of Internal Affairs with certificates of drug testing and the absence of infectious diseases: HIV, syphilis, leprosy, tuberculosis and COVID-19. They are also required to undergo an X-ray examination, give fingerprints and a biometric photo.

This measure, according to Shepp, is discriminatory. He predicts that in 2022, even more German companies may cease operations in Russia if the Russian authorities do not take measures to improve the business climate.

According to the Central Bank of the Russian Federation, the total volume of direct investments from Germany to Russia as of July 1, 2021, amounted to $ 19.6 billion. This amount has not changed since 2014, when the annexation of Crimea and the war in the Donbas lead to a sanctions war with the West. In the first half of last year, the volume of German investments in the real sector of the Russian Federation increased by $ 1.6 billion. In total, in 2021, the Russian economy received $ 30.7 billion of direct investments – almost four times more than a year earlier. However, the outflow from Russia under the same article – direct investments abroad, which, as a rule, masks the withdrawal of profits overseas- increased by 70% and amounted to $ 53.6 billion, an increase of $22.9 billion. Net capital outflow from Russia in 2021 accelerated by 44% and reaching a 7-year record – $72 billion.

(C)UAWIRE 2022

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