What’s
Wrong Today:
The Wall Street Journal reported
last night that Mr. Putin met Wednesday with the CEO of Siemens, the German
industrial firm. Siemens recorded €2.17 billion ($2.99 billion) in sales to
Russia for the 2013 fiscal year. That equaled 2.9% of the company’s total
revenue.
Mr. Putin met Siemens
CEO Joe Kaeser at his official residence outside Moscow on Wednesday. The men
posed for the cameras and talked up Germany and Russia’s special economic
relationship. Siemens began conducting business in Russia 161 years ago, when
it built the Czar’s telegraph network. Kaeser said:
has been present in Russia since 1853—a presence that has survived many highs
and lows…We want to maintain the conversation even in today’s politically
difficult times. For us, dialogue is a crucial part of a long-term relationship
While this meeting
was going on, the WSJ also reported
that Mr. Obama spent
much of Wednesday telling US allies that they need to “step up” their
commitments, particularly on sanctions and military security.
Despite
those exhortations, German industry has been hard at work under the radar of
official diplomacy to establish an informal channel, shuttling between Berlin
and Moscow to prevent an all-out economic war. But the Siemens meeting wasn’t simply
an emergency response to the current sanctions spiral; it had been planned
during their prior meeting in October 2013.
This shows
how connected German industry and Russia are, since regular powwows are de rigueur. This time,
Kaeser explained
to Putin that Siemens, which has already invested €800 million in Russia,
wanted to continue its long-term involvement and localization strategy in
Russia. A Siemens spokesman said:
the conversation break off even if it is perhaps difficult politically at the moment.
So [Siemens] would continue to produce in Russia and help industrialize the
country
CEO Kaeser
said to (Russian News Agency) Tass:
personally do not feel any pressure from the federal authorities, and certainly
there has been no pressure when the chief executive of Germany’s leading
company, cooperating with Russia for 160 years, comes to meet the Russian
president
According
to Wolf Richter at Testosterone
Pit, Siemens, employs more than 3,500 people in Russia. It partners with
state-owned Russian Railways, (whose president, Vladimir Yakunin is on the US
sanctions blacklist) to provide high-speed trains.
Richter
reports that 6,200 German companies are trading with Russia, and that German
companies have invested €20 billion in Russia, with about 300,000 jobs in
Germany depending on the economic relationship with Russia.
Yesterday
we wrote about Nord
Stream, the Russian gas pipeline company that provides a pathway for Russian
gas to get to Germany. One little-known fact is that Gerhard Schröder, German Chancellor
from 1998 to 2005, (succeeded by Angela Merkel) had pushed Germany into the
Nord Stream deal. It was signed in October 2005, shortly before he left office.
He immediately joined Nord Stream AG as Chairman of the
Board. Thanks to Schröder’s foresight, the Nord Stream system has increased
Germany’s dependence on Russian natural gas.
The interlocking
directorates continue: Gazprom, the Russian semi-public gas company, owns a
controlling 51% of Nord Stream. The remaining 49% are owned by German utility E.on, German chemical company BASF, and
Gasunie, a Dutch natural gas infrastructure company. Gazprom Chairman Alexei
Miller, who Kaeser also met while in Moscow, is Deputy Chairman of the Board of
Nord Stream.
It’s good
to have Gerhard Schröder on board, bringing all of these people together. Reuters reports that, in Schröder’s new book, “Klare Woerter”
(Straight Talk), that Putin is fluent in German and knows Germany very well. Schröder speaks about his
personal relationship with the Russian leader, who worked as a KGB spy in East
Germany in the 1980s:
lived here for a long time and has a very close relationship to Germany…That
made it easier to work with him than with other leaders
Chancellor
Merkel has seen the handwriting on the wall. She has been very
vocal in condemning Putin’s actions, but on Wednesday, she commented (to Tass) that the Ukraine
situation:
stage that implies the imposition of economic sanctions on Russia. And I hope we will be able to avoid it…I am
not interested in escalation. On the contrary, I am working on de-escalation of
the situation
So she clearly
forgot to check in with President Obama on the sanctions thingy.
Anyway, her
statement may not be a surprise, given the intricate and convoluted
relationships between Germany and Russia. Consider this quote by another former
German Chancellor, Helmut Schmidt, on Wednesday:
US sanctions against Russia are stupid and any economic pressure would
have symbolic significance
Mr. Obama
ought to consider why the EU, already in a fragile economic state, would want
to create more regional tension and revive the Cold War?
From
the Eurozone’s perspective, it may need to stay the course in the absence of strong
leadership and the need of the 18 Eurozone members to act unanimously:
- Angela
Merkel is probably the most popular Euro leader and has to govern through a domestic
coalition. Also, she won the latest election by winning a large majority of the
German women’s vote.
- David
Cameron also leads a coalition, but is outside the Eurozone, and has some capacity
for independent action vs. Russia.
- Francois
Hollande also leads a coalition, but is recovering from his party’s disastrous result
in local elections, as the far right did better than expected, while he is also
battling a poor economy.
How did we
get to this place where Europe now appears to be a satellite of US foreign
policy when 11 years ago, it was deeply skeptical of the US desire to invade
Iraq? Why would Merkel act against the self-interest of her country in order to
follow Obama like Tony Blair followed George W. Bush? It is unlikely that she
will.
What has changed
in ten years?
Ooh,
Putin.
