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Crisis – time to unite

The Russian-German Chamber of Commerce, which includes a thousand member companies, is the largest foreign business association in Russia. In times of crisis, it becomes especially clear how important business associations are in establishing the link between politics and economics.

Matthias Schepp, chairman of the board of the VTB and head of the German economy in the Russian Federation, answered RG’s questions. He listed the main problems faced by business during the pandemic, spoke about the prospects for Russian-German economic cooperation and the role of the ITC in the development of relations between Russia and Germany.

Mr. Schepp, before talking about the economy, Please tell us what connects you personally with Russia?

Matthias Schepp: Russia has become my second homeland, I fell in love with the inhabitants of this country and I feel at home here. The first time I came to Russia was in the 90s. Then I worked first in the bureau of the “Stern” edition, later – in the bureau of the “Der Spiegel” magazine in Moscow. It was a difficult time: the painful transformation of the economy, the October 1993 putsch, the 1998 default. I was not just an outside observer – I experienced all these events together with the country, not least because my wife Marina is a Muscovite. We have been married since 1994 and at that time I definitely had more Russians in Moscow than German friends. In 1995, the Union of the German Economy in Russia appeared. He was the predecessor of the Russian-German Chamber of Commerce, with which, 11 years later, I was destined to link my professional path.

This year the VTP celebrated its 25th anniversary. What does this organization mean for German business?

Matthias Schepp: VTP is the voice of German business in Russia and Russian business in Germany. We try to convey business ideas to the governments in Moscow and Berlin. We are a strong lobbying organization. Regardless of what happens – default, sanctions, the collapse of the ruble – we are a strong support for business. Today, VTP has 1,000 members, ranging from DAX companies to family firms and small and medium-sized businesses. Working in Russia is fraught with a number of difficulties that German companies cannot always cope with on their own. Here we come to the rescue: we provide legal support, advise, provide market analysis.

How has the novel coronavirus pandemic affected German companies doing business in Russia?

Matthias Schepp: The multiple constraints and associated risks have certainly left entrepreneurs and investors feeling insecure. But, despite the weakening market conditions, German business retains faith in the Russian market. This is evidenced by the growth of direct investment from Germany to Russia in the third quarter of 2020. Compared to the summer recession, German investment in the fall months increased by 160.9 percent. Even during the coronavirus crisis, many German entrepreneurs are successfully developing their business in Russia. This is due to the fact that they use modern technology, have a high level of organization and corporate culture.

We were well prepared to translate numerous events in 2020 into online format

What are the most serious problems faced by German business during a pandemic?

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Which industries have been hit hardest by the coronavirus crisis?

Matthias Schepp: Along with the hotel and restaurant sector, the automotive industry was perhaps the most affected. Two factors played a role here. First, the purchasing power of the population has decreased due to the restrictions introduced in the first wave of the pandemic. Secondly, due to the depreciation of the ruble, prices for new cars have increased significantly. As a result, sales fell by 13.5 percent compared to last year.

But there are areas that, on the contrary, benefited from the coronavirus crisis. So, the turnover of companies offering services in the field of telecommunications increased from January to September by 5 percent compared to 2019. The growth is even more noticeable in the field of IT services: volumes there increased by 39 percent.

How did this period affect the work of the VTP itself?

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1.5 billion euros – Globus turnover in 17 hypermarkets throughout Russia

What other projects and achievements in 2020 is VTP particularly proud of?

Matthias Schepp: In recent years, Russian President Vladimir Putin has repeatedly noted the importance of introducing world-class technologies in the field of environmental protection and ecology. Supporting this idea, the Russian-German ECP has been promoting the unique online platform Germantech since 2019. It presents the most advanced environmental technologies for Russian companies and municipal services, for example, waste collection and disposal. In order to create the platform, VTU attracted investments from both Russian partners and initial funding from the German Ministry of the Environment. Today 38 companies are registered on the platform.

In what other industries, in your opinion, Russian-German cooperation will develop especially effectively in the near future?

Matthias Shepp: The most promising area seems to us to be directly related to the topic of environmental protection. These are hydrogen technologies. Germany is the first country in the world in terms of the development of hydrogen technology. Russia, with its colossal water resources, could become an ideal partner for it. In addition, Russia and Germany already have many years of experience in successful cooperation in the oil and gas sector. Therefore, in June, the VTP published a position paper in which it advocated the early development of the Russian-German partnership in the field of hydrogen energy.

Digitalization of the economy and dual professional education are no less important areas of cooperation. Here, the HTP is successfully developing the projects “German-Russian Initiative for Digitalization of the Economy” (GRID) and “Dual Professional Education” (AHK Dual).

Germany is the first country in the world in terms of the level of development of hydrogen technologies. Russia could be an ideal partner for her VTP member companies are developing in line with the ongoing course of localization in Russia. In different regions of the country, German companies regularly open new businesses, farms, logistics and research centers. Thus, the Russian-German company EkoNiva has become a real agricultural giant. In terms of milk production, it won first place in Europe. Another German company actively localizing its activities in Russia is Globus. Its turnover in 17 hypermarkets throughout Russia is almost 1.5 billion euros. Most recently, at the end of September, Globus opened a logistics center in the Moscow region of Pushkino, where almost 900 people work. At the opening, the Minister of Industry and Trade of the Russian Federation Denis Manturov and the Minister of Economy of Germany Peter Altmeier made a welcoming speech.

German companies implement their projects in close cooperation with Russian partners. This cooperation is developing especially actively in the transport area. For example, Siemens and Sinara Group have launched the production of Lastochka electric trains in the Sverdlovsk region. Siemens is also fulfilling the order of Russian Railways for 13 new Sapsan trains, and this is the third batch of such products. In addition, together with the Federal Customs Service, the logistics company Rhenus, Russian and German customs authorities, we are developing a project for a “green corridor” between Russia and Germany.