The announcement made more severe Sanctions against Russia puts German companies in unrest. Many companies say that it is not yet clear to them which products and business activities are specifically affected by a tightening of sanctions. But there is a risk that the overall economic situation in Russia will continue to deteriorate. “There can be direct effects and indirect ones through a domino effect. Then it also radiates to other areas”, says an industrial manager.

It’s already slipping russian economy increasingly into recession in view of the ongoing conflict in Ukraine. A few days ago, the International Monetary Fund therefore had to revise its growth expectations for the current year downwards to 0.2 percent.

Germany would be particularly hard hit by a slowdown in the Russian economy. Last year, German companies mainly exported machines, vehicles and vehicle parts as well as chemical products worth 36.1 billion euros to the country. Russia, for its part, supplies oil and gas to Germany.

Car manufacturers are already feeling the consequences

Car manufacturers are already feeling that the economy in Russia is weakening. In May the Russian car market collapsed by twelve percent, and in June by as much as 17 percent. The downward trend continues. The experts from market researcher IHS Automotive expect the Russian car market to collapse by at least 8.8 percent this year. “If Russia does not decide to support the market, we expect a collapse of 14 percent”, says IHS expert Tatiana Hristova.

IHS is not alone in this analysis. “We expect the decline to increase significantly in the second half of 2014 due to the expected further economic sanctions”, writes Ferdinand Dudenhöffer, director of the Center Automotive Research (CAR) at the University of Duisburg-Essen, in a recent study.

According to the expert, even if the crisis is resolved, it will take until 2017 this year for the Russian car market to recover. The auto industry in Russia is on a “dry track”.

The premium car manufacturers are less affected by the situation than mass manufacturers Although recorded Audi and BMW losses last month. However, Russia is not a particularly important market for premium vehicles. The share of Russia’s business at Audi, BMW and Mercedes-Benz is between two and three percent. The risk therefore remains “manageable”, says Dudenhöffer.

The situation is different for mass manufacturers. Opel’s dependence on Russia is particularly pronounced among German car manufacturers. The Chevrolet brand in Russia is now assigned to Opel. The Ukraine crisis is therefore making the renovation progress on the brand with the Blitz more difficult.

Concern about further devaluation of the ruble

Car manufacturers are therefore monitoring the situation in Ukraine very closely. We are in contact with the responsible authorities Volkswagen with, and hope for a “peaceful solution” to the conflict. It is necessary that everyone involved stays in conversation.

The dependence on Volkswagen is not that strong. The VW, Skoda and Seat brands made around 4.2 percent of sales in Russia last year, Dudenhöffer determined.

Dudenhöffer expects that the crisis in Russia will not overtake Volkswagen without a trace. “Overall, the Russian situation would be sustainable for VW if significant investments had not been made in expanding capacity in Russia”, he writes. “VW is therefore sitting on a capacity and cost problem in Russia that is putting a strain on the group’s overall situation.”

There is widespread concern in the German economy about a further devaluation of the ruble. The Russian currency had recently lost massive amounts of value. Companies therefore receive fewer euros for the goods and services they sell in Russia. That’s a burden on the profit.

Sporting goods manufacturers also get that Adidas and Puma to feel. Russia is one of the most important individual markets for Adidas. CEO Herbert Hainer personally checks every day how the value of the ruble is developing. The company will provide information about business developments on August 7th. On Monday, Puma said the weak ruble had depressed profits.

160-year relationship with Russia

This affects companies in all industries. The large household appliance manufacturer Bosch Siemens (BSH) warned weeks ago in its annual report that tensions between Russia and the EU over Ukraine could “significantly affect” business development. Reference is made to shifts in currency parities and possible trade restrictions. BSH has opened a new washing machine plant in St. Petersburg.

Siemens boss Joe Kaeser recently indirectly admitted to politicians that they were intervening with sanctions against Russia because of the Ukraine crisis. “The core question is: How can the situation be de-escalated and the country be permanently pacified? The primacy of action naturally lies with politics”, said the Siemens boss.

He met with Russian President Vladimir Putin in Moscow in March to talk about business and investments. Kaeser defended his visit as a customer visit.

In view of a 160-year relationship with Russia, the group “will not be unduly guided by short-term turbulence in our long-term planning”, said the Siemens boss at the time. As he later admitted, he would not use this formulation again given the escalation of the situation.

Tranquility in the defense industry

Siemens has extensive business relationships with Russia. In the 2013 financial year, which ended at the end of September, Russia sales were 2.2 billion euros. The German group has over 3,120 employees in Russia and operates eight plants. Siemens operates in Russia in all four main pillars of the group’s activities, i.e. energy, health, industry and infrastructure.

The range extends from locomotives to high-speed trains, power plant turbines, medical technology devices and industrial controls. According to its own information, Siemens has invested one billion euros in the expansion of Russia’s activities and new development facilities in recent years.

However, the arms industry remains calm. “We currently have an export volume of around 35 billion euros towards Russia for the entire German economy. The German security and defence industry is only there for one per thousand, so we are not affected by the planned sanctions”, the general manager of the German security and defence industry (BDSV), Georg Wilhelm Adamowitsch, told Deutschlandfunk on Tuesday.

If politicians now impose economic punitive measures to put pressure on Russia in the Ukraine dispute, he believes that is right. According to the association, around 100,000 people are employed in the German defense industry. An additional 200,000 jobs are indirectly connected to it.