Ukraine Conflict

After Seeking Middle Ground, German Businesses Join Push for Harder Russia Sanctions

russian seperatists guarding crash site
Armed pro-Russian separatists stand guard at a crash site of Malaysia Airlines Flight MH17, near the village of Hrabove in the Donetsk region on July 20, 2014.
  • Why it matters

    Why it matters

    Germany, given its location in the middle of Europe, has historically tried to balance competing interests in the region.

  • Facts

    Facts

    • The German business council drops its opposition to harsher sanctions after the downing of the Malaysian Airlines plane.
    • The group, the Committee on Eastern European Economic Relations, supports German business interests in the region.
    • On Thursday, the European Union expanded its sanctions to a broader group of people and businesses in Russia.
  • Audio

    Audio

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German businesses are losing patience with Russia and no longer oppose sanctions, according to Eckhard Cordes who chairs the Committee on East European Economic Relations.

The committee supports German business interests in Russia and in the region. It consists of 200 firms from Germany which are active in Eastern Europe.

“If the German government and the E.U. impose sanctions, we will back them 100 percent,” Mr. Cordes told the Handelsblatt.

He emphasized that the situation has fundamentally changed since the shooting down of the Malaysian Airlines passenger plane in Eastern Ukraine killing almost 300 people. He called the response to the catastrophe “inhumane.”

“Mr. Putin needs to exert his influence on the separatists and if he doesn’t have any influence, then he needs to get it,” Mr. Cordes said.

 

GDP forecast
GDP economic forecast for Russia. Source: Bloomberg

 

Until this point, the council had opposed sanctions on Russia. “But if Putin continues along this route, this is not the route that German business will take.”

German businesses had hoped that the crisis in the Ukraine would be resolved without the need for tough sanctions.

Germany has significant trade interests in Russia and also relies on Russia for a third of its gas supplies.

Mr. Cordes conceded that sanctions would hurt German business. “But if it’s a price we have to pay, then we will pay it.”

Historically, Germany has continually sought to balance its relations with Russia and with the United States. Since the 1970s, German politicians have chosen to engage with Russia over confrontation and isolationAt the outset of the Ukraine crisis, the response of the German government was nuanced and gradual, according to observers.

Now, throughout Europe, firms are weighing up the contracts they have with Russia and the implications of sanctions.

 

“If the E.U. applies sanctions against Russia, it is important that these sanctions can also be reversed.”

Eckhard Cordes, Chairman German Committee on Eastern European Economic Relations

Sanctions would affect the German mechanical engineering industry in particular, according to the Frankfurter Allgemeine Zeitung newspaper. Exports from the sector fell by 17 percent in the first quarter due to uncertainty about the situation between the two countries.

Mr. Cordes told the Handelsblatt he believes that the “change through trade” policy strengthened relations between Russia and the West. And he warned against dissolving these economic ties. “It is not in Western interests to isolate Russia.”

“If the E.U. applies sanctions against Russia, it is important that these sanctions can also be reversed,” he said.

Mr. Cordes noted that the moderate measures that have already been introduced are already affecting Russian businesses. He said that if the E.U. imposes sanctions similar to those by the United States barring some Russian banks and companies from its markets, they would take effect very quickly and could strongly affect Russia.

 

putin
President Putin faces new sanctions. Source: AFP

 

He warned against excessive measures that could put Mr. Putin on the defensive and make it difficult for the Russian president to make compromises internally. “This needs to be handled with a far-sighted strategy,” he said.

Mr. Cordes continued to hope for peace in the region. “There is no alternative to a cease-fire and unconditional investigation into the destruction of the plane.”

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