Russian sanctions alarm German business

Berlin (Alliance News) - The international community's move to impose sanctions on Moscow has set alarm bells ringing across the German business community, which has stepped up its links to Russia in recent years.

"We have already seen a considerable amount of uncertainty in business as well as growing economic risks," said Eckhard Cordes, who chairs the Federation of German Industry's Committee on Eastern European Economic Relations.

"The European economy could face ongoing damage if a spiraling of mutual economic sanctions is set in motion," Cordes warned.

About 6,000 German companies have invested 20 billion euros (27.73 billion dollars) in Russia, which is also Germany's most important oil and gas supplier. Around a third of Germany's oil supplies and 40% of its gas originate in Russia.

In contrast, US investment in Russia totals about 7.4 billion euros.

Concerns about the threat sanctions pose to energy supplies from Russia has in turned raised fresh worries about Chancellor Angela Merkel's so-called energy transformation, or "Energiewende." It is partly based on gas supplies helping to replace nuclear power, which Germany is phasing out.

"We cannot afford sanctions because we are increasingly dependent on Russian deliveries as a result of the Energiewende," the head of Germany's Ifo economic institute, Hans-Werner Sinn, told the daily Passau Neue Presse.

The protracted cold winter in the US has already led to oil and gas prices edging higher.

"The current crisis can result in uncertainty on the energy markets," said Leon Leschus, energy expert from the Hamburg World Economic Institute.

Those uncertainties also have raised concerns about economic turmoil in Central and Eastern Europe negatively impacting the economic upturn currently under way in Germany.

The Ukraine crisis also could not have come at a worse time for the Russian economy, which is struggling to regain momentum after it slowed sharply.

Underlining the current weak conditions prevailing in Russia, German exports to the nation fell 11.2% to 8.7 billion euros in the final three months of last year compared with the same period in 2012. Imports were down 9.7%.

Cordes said the committee expects the trend to strengthen this year, resulting in a further decline in German trade with Russia as the cost of German exports rise following the sharp devaluation of the ruble in the wake of the standoff over Ukraine.

But analysts also said Russia's downbeat economic picture would make it difficult for Moscow to reduce energy supplies to Western Europe, part of which are pumped through Ukraine.

"The Russians need money," said Heino Elfert, who heads the Hamburg-based Energy Information Service.

Copyright dpa