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German businesses fear Russian sanctions

– Posted in: International Business Relations
German businesses fear Russian sanctions - Image credit: Thinkstock/Getty Images News

German businesses have voiced concerns over incoming sanctions from G7 nations against Russia.

The US, the UK, France and Japan are among the countries pressing hardest for more substantial penalties against Russia, which has riled western politicians in recent weeks due to its intervention in Ukraine.

But after weeks of political turbulence, German businesses are starting to become scared they will be affected by the ripple effect of harsh sanctions on Russia.

Revolution

After Ukraine's former president Viktor Yanukovych was overthrown by protesters in Kiev, Russian troops moved in and quickly annexed the Crimea region to the south of the country.

This move was condemned by every member state on the UN Security Council apart from China, which abstained due to its unwillingness to back separatist movements – mainly due to the fuel this could give activists in the contested Tibet and Taiwan areas of the world.

Nevertheless, Russia's president Vladimir Putin seems to have been unaffected by this and has allegedly continued to back militants in the east of Ukraine seeking to split from the Kiev-based government.

Sanctions

Western leaders including Francois Hollande, Barack Obama and David Cameron have all been quick to rule out military action in the east of Ukraine, as this would directly pit NATO troops against Russian forces – something that could spiral out of control and cause a wider conflict.

However, the politicians also know that any incursion by Russia into eastern Ukraine would set a dangerous precedent.

In an attempt to stop this from happening, sanctions have been placed on a number of high-profile Russian oligarchs believed to be close to Mr Putin's inner-circle of decision makers.

For now, these are mainly asset freezes and travel visa bans that will have a limited effect on Russia's capital markets, but businesses from across the west – especially those in Germany – are nervous about further moves to antagonise Russia.

Gas

One of the main reasons German businesses are nervous about harming relations with Russia is because of the central European economy's dependence on Russian gas imports.

After the Fukushima crisis in Japan in 2011, the German grand coalition government sought to shut the majority of nuclear power plants within its borders.

While this appeased an electorate that was concerned about the possibility of a nuclear catastrophe similar to that seen on the east coast of Japan, it did limit Germany's energy diversity and made it more dependent on Russian gas imports from state firm Gazprom.

Any increase in the wholesale cost of gas in Germany would have a significant impact on the German population's buying power and could affect the performance of large industrial companies dependent on the cheap fuel that Russia currently provides.

"Close to war"

Speaking to the El Pais, Le Monde, La Repubblica and Gazeta Wyborcza newspapers, German foreign minister Frank-Walter Steinmeier claimed that the situation in Ukraine was "stepping towards war" and had to be de-escalated immediately.

"The bloody pictures from Odessa have shown us that we are just a few steps away from a military confrontation," he said, commenting on the recent bloodshed in the east of Ukraine.

"[We need to reach a] clear conclusion as to how this conflict can be brought to a halt," Mr Steinmeier added.

But with Germany's business lobby increasingly leaning on Mr Steinmeier to resolve the situation, Russia could be forgiven for seeing Angela Merkel's government as a weak touch and a potential pseudo-ally in its attempts to hold its gains in the south and east of Ukraine.

An end in sight?

The incredibly complex situation unfolding due to the Ukraine crisis just highlights how interconnected global economies are. If Gazprom are instructed by the Kremlin to boost prices, all of central and eastern Europe could spiral into recession.

Here at London Translations, we appreciate the intricacies of cross-culture collaboration, appreciation and understanding – something that has indeed been brought to the fore in light of recent tensions.

We are also well aware of the domino effect that one move can have on a wide variety of stakeholders. For example, getting just one word wrong in the translation of an important document can entirely change its meaning and could potentially jeopardise a partnership worth millions of pounds.

It will be interesting to observe the impact of these sanctions on Russia, but so long as there's a looming risk of further military action and threats to commercial interests, we will continue to watch with bated breath.

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