The sanctions against Russia imposed by the USA in 2014 still have a lasting impact on the economy between Germany and Eastern Europe. The punishments also had an extraordinary impact on logistics and transport. In 2019 the measures will be in place for five years - is it time to lift the Russia sanctions? OCS clarifies.
Thanks to our many years of experience with transports to Eastern Europe, we have paid close attention to the developments of our neighboring countries to the east in recent years. Not primarily with concern, but still with a certain touch of skepticism. It is not for nothing that relevant media reports on billions of euros in losses for the German economy, which were noticeable in every area of the value chain. Cross-border supply chain management in particular had to contend with major challenges in planning and organizing logistics.
Different currencies caused exchange rates to fluctuate
On the stock exchange it was possible to observe with a worrying certainty how the curve of the exchange rate of the ruble against the euro kept swinging up or down. Price changes of between 16 and up to 140 percent per year definitely did not create a feeling of stability. Due to increased oil prices in 2018, the Russian currency is now steadily recovering due to the stable development of the costs for the natural resource. Unfortunately, this alone is not enough to put into perspective the impact of exchange rate fluctuations on Russian purchases in Europe. European services and goods are still too expensive for Russian consumers, which also affects the industrial sector and especially the logistics sector.
Russia's orientation towards Asia
The geographical proximity to the Asian continent without an ocean separating it made it easy for the Russians to simply realign their trade chain. This was an enormous advantage for Russian imports, as they could be carried out overland instead of by shipping. Only the direction of the transport changed from West to the Far East and the sanctions could be circumvented. As a result, the global economic level changed dramatically and led to an imbalance that had never been seen before.
The German middle class in particular is struggling
Although the situation brings with it points of contact for Germany as a whole as a business location, small and medium-sized companies (SMEs) are particularly affected by the drastic drop in sales. Medium-sized companies are struggling, especially in eastern Germany. The slump came with the sanctions; a trading high that lasted until the end of 2013 ended with a sudden decline in German-Russian trade volume. Germany is Russia's most important trading partner; around 10 percent of Russian imports were delivered from the Federal Republic. These primarily include machines, food, cars and electrical engineering products. The good business relationships between East German medium-sized companies and Russia, some of which had been built up with care and trust over decades, suffered as a result of the sanctions.
An end to the sanctions is still not in sight
The good news: There is gradually a noticeable stabilization of the economic situation between Europe and Russia. However, reaching the level that had been built up before the introduction of the sanctions is currently more of a vision than a reality. Nevertheless, the ambitions on both trading sides are still striving. And not just Germany, but the entire EU policy is taking a new course towards Eurasia. With the connectivity strategy, the European Commission has put forward a proposal to improve transport networks, energy networks and digital networks. However, the goal of the strategy is also the relationships between people as the most important feature.
German Foreign Minister Heiko Maas would like to continue to encourage German companies and attaches importance to a new Eastern European policy that should include not only Ukraine, but also Russia. However, in addition to the EU sanctions, which have been extended for the eighth time, the US sanctions are particularly dangerous, as America will probably continue to exert its power. The new, resulting effects cannot yet be foreseen.
Strengthening German-Russian relations is more important than ever
Despite all the economic difficulties, German companies should not give up hope, as progress can be sustained despite strained relationships. Especially now, maintaining relationships with Russian business and production partners is of immense importance and should definitely not be neglected, especially if the basis is a long-standing, good collaboration.
As an expert in transport and logistics for the regions of Scandinavia, Eastern Europe and Central Asia, OCS Spedition is particularly keen to inform you as a customer about the current political changes. With us as your partner at your side, you can always rely on safe and competent transport processing. For us, this also includes advice on your transport and your project. If you have any further questions, please contact us directly so we can discuss your doubts and concerns.
