I keep posting these news items in full because I think that the repercussions from these trade wars with Russia will have a big influence on world markets over the next few months
German Economy Backbone Bending From Lost Russia Sales
Russia has responded to the sanctions with import bans on an array of food stuffs from the U.S. and Europe, including fish, beef, pork, fruit, vegetables and dairy. Close Russia has responded to the sanctions with import bans on an array of food stuffs from...
Russia has responded to the sanctions with import bans on an array of food stuffs from the U.S. and Europe, including fish, beef, pork, fruit, vegetables and dairy. MWL Apparate Bau GmbH, based in the eastern German town of Grimma, has relied on strong ties with Russia to bolster business. Today, those links don’t mean much.
The maker of equipment such as pressure vessels and hot water tanks for the chemical and petrochemical industries has seen a “significant” decline in orders in the last six months due to the crisis, sales chief Reinhard Weber said. The company has annual revenue of about 20 million euros ($27 million). There are two contracts from Russia we didn’t get and we think that’s for political reasons,” Weber said in a telephone interview. “They’re afraid of sanctions being extended -- that they will make an order and that we won’t be able to fulfill it because of political decisions in Germany or Europe.”
Waging Financial War MWL is one of many businesses in Germany’s Mittelstand, the thousands of small- and medium-sized companies that form the backbone of Europe’s largest economy, that are already getting pinched as Russian customers put off purchases. With the crisis now intensifying through deeper European Union and U.S. sanctions and retaliatory measures from Russia banning EU and U.S. food imports, they’re preparing for an even bigger hit.
Take Amandus Kahl GmbH. The maker of food processing and recycling machinery near Hamburg had expected to bring in about 10 million euros in revenue this year from Russia. Sales to the country “have pretty much evaporated because our clients can’t get financing,” Rochus Mecke, a Kahl’s sales director, said in an interview. “We still get inquiries, but it’s only inquiries.”
Worsening Situation
Even before the confrontation deepened with the July 17 downing of MH17 over territory held by pro-Russian separatists in eastern Ukraine, German business was being impacted. Factory orders in June dropped the most in more than 2 1/2 years. With the escalating measures from both sides, executives are bracing for the situation to worsen. German business sentiment fell for a third straight month in July to the lowest since October, according to the Munich-based Ifo institute.
The Mittelstand, which accounts for 52 percent of Germany’s economic output, is made up of businesses that generally have a focused product offering and more regional sales. That means those reliant on Russia are less able to shift output to other areas of the world in the way global companies like Bayerische Motoren Werke AG and Siemens AG can. “The Mittelstand largely has a less diversified business,” said Tobias Baumann, an economist responsible for Russia at the German Chambers of Commerce and Industry in Berlin. “The biggest danger is that highly specialized companies with a high share of exports to eastern Europe are deliberately let be run into the ground and that technical skills are lost as a result.”
Escalating Sanctions
EU sanctions announced last month restrict the export to Russia of equipment to modernize the oil industry and forbid the sale of machinery, electronics and other civilian products with potential military uses. New arms contracts with Russia are also not allowed. Russia responded with import bans on an array of food stuffs from the U.S. and Europe, including fish, beef, pork, fruit, vegetables and dairy.
