German Machine Builders Say Russia Crisis Leaving Scars

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German machine builders are increasingly feeling the effects of the Russia-Ukraine conflict as exports to the country continue to drop significantly, the VDMA machine-builders lobby said.

Machine exports to Russia may drop between a quarter and a third this year amid a slump of 28 percent in the first quarter, Ralph Wiechers, head economist of VDMA said Friday at a press conference in Frankfurt. That follows a decline of 17 percent last year.

Tensions between Russia and the European Union escalated last week after Russia banned 89 people including politicians from entering the country. Russian companies have difficulties financing purchases from Europe because of a weaker ruble and competition from Chinese suppliers is increasing, VDMA said.

“Unfortunately, machine-building exports accelerated its downward trend at the beginning of the year,” VDMA president Rheinhold Festge said at a press conference in Frankfurt, where the association with 3,100 members is based.

About 94 percent of respondents in a VMDA survey of its members said they are affected by the crisis, with 83 percent booking less orders, the association said Friday. The turning point for orders may come in the second half, Festge said at the press conference.

Zeppelin GmbH, which sells and services construction and mining equipment, said in November it’s losing business to Asian competitors in the wake of sanctions imposed by the European Union following the Russia-Ukraine conflict.

Scania AB, the largest foreign seller of heavy trucks in Russia, is forecasting that the country’s commercial-vehicle market will bounce back sharply in 2016. While scaling back production, the Swedish manufacturer doesn’t plan to shutter its Russian plant and truckmakers from Europe are likely to stay in the local market, Hans Tardell, managing director of Scania’s business in the country, said in May.

Ukraine has been battling separatists in the east for more than a year in a conflict that has claimed more than 6,100 lives and led to the biggest confrontation between Russia and the U.S. and Europe since the Cold War.

European Parliament President Martin Schulz, who is German, said on Saturday that the Russian travel curbs heighten Western wariness of Russia’s foreign-policy goals, diminishing mutual trust and hampering constructive dialogue.