Germany Hurt by Loss of Preferred-Supplier Status in Russia

  • Chinese companies agressively filling gap left by Germany
  • German companies seen as `unreliable,' Wintershall CEO says

Germany is losing the status of preferred supplier in Russia and Chinese companies are rushing to fill the gap, said Mario Mehren, chief executive officer of BASF SE’s oil and gas arm Wintershall.

“At a political level, Russia and its people are turning away from long-term relationships with Germany because they do not always understand our policies,” Mehren told reporters after a press conference in Kassel, Germany, where the company is based. “Other companies are using the gap that German companies are giving them. That is a fact and that will be difficult to turn around.”

While Wintershall’s relationship with Russia’s Gazprom PAO remains intact, the German oil and gas producer has had to “fight” to bring in equipment from western suppliers, Mehren said. Bilateral trade between the two countries has slumped and German companies are seen as unreliable because some are leaving Russia in the wake of economic sanctions and the devaluation of the ruble, the Wintershall executive said.

“I definitely think that it will take a long, long time to re-establish Germany’s position as a preferred supplier for certain goods in Russia,” Mehren said. “And we have to face it -- other companies are quite aggressive. China, to name them first.”

Ukraine Tension

Trading volume between Germany and Russia dropped 24 percent in 2015, according to Germany’s Committee on Eastern European Economic Relations.

The German-Russian relationship has improved since last year and one sign of that is Wintershall being able to complete the asset swap with its Russian partner. The deal had been put on ice after Russia annexed Crimea in 2014. Russia-Ukraine tensions have remained high, with Ukraine at the end of last year suspending repairs of sabotaged power lines that left Crimea with no electricity.

“Russian companies are improving significantly,” Mehren said. “We should not expect that Russian companies are just sitting there and waiting until the westerners turn back again and say now you can buy our stuff. They will have their own solution and where they do not have their own solutions they will have China, they have Korea. So the situation is damaging to the industry in Germany.”

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