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Business

Oil Rich Russian Tycoons Flock to Germany

Buoyed by a surging oil-powered economy, flush Russian companies are seeking lucrative opportunities abroad. Now they are increasingly opting to invest their millions in Germany.

Escada store in Düsseldorf

Russian conglomerate AFK Sistemam has invested in German luxury fashion house Escada

In recent years, Russian firms, both large and small, are increasingly trying to break into the German market, and and those who have gained a foothold have made quite a success of it.

Russian companies have bought stakes in high-profile German companies such the giant travel operator and Europe's leading travel group TUI, fashion chain Escada, the Air Berlin airline and shipyards in the Baltic ports of Wismar and Rostock.

Russian billionaire Suleyman Kerimov, a key stakeholder in Russian energy giant Gazprom, has been reported to be considering boosting his stake in Germany's biggest bank, Deutsche Bank.

Flush with cash, Russian investors are eyeing nearly every crucial sector of the German economy from cosmetics, fashion and tourism to construction, real estate, energy, media and shipbuilding. Potential investors have been sending scouts to sniff out the German market and analyze where the money could be put to best use.

According to the head of the Russian Chamber of Trade and Commerce in Berlin, Sergey Nikitin, Russian companies investing in Germany are primarily interested in opening up new markets in the West and burnishing their image by adding the "Made in Germany" label to their product range.

"Russian companies are extremely interested in modernizing their machinery and equipment,” Nikitin said. "And it's only natural that many of them are trying to do this with the help of a strong, reliable and experienced partner. This is why they turn to Germany to make use of the country’s technical expertise and with it expand their product range."

Past prejudice makes Germans wary

Russian President Medvedev

New President Medvedev has bolstered investors

Not long ago, it wasn't unusual to find a large number of German businesses extremely wary of the multi-billion ruble investments from Russia. On many occasions it was unclear where the money came from and what investors planned to do with it exactly.

That's likely to change over the next couple of years, however with Russia’s expected entry into the World Trade Organization.

Investment has also been made easier by the new Russian president’s promise to work towards liberalizing the domestic economy and fighting corruption.

During his recent visit to Germany, Dmitry Medvedev called on the German business community to treat Russian companies and investors as equal partners. He said there was no reason to keep restrictions for Russian investors in place.

German companies are likewise speaking of a new openness and transparency when it comes to mutually beneficial deals.

"Of course there are still some prejudices in place," said Nikitin. "But once it gets down to nitty-gritty and German and Russian businessmen deal with the details of their contracts, misconceptions and prejudices are usually removed very fast.

“It’s a new situation for the German business community to deal with Russian partners on this scale," he added.

Scales tipping in Russia's favor?

The scale, however, still appears to be tipped in Germany’s favor. More than 4,000 German companies including heavyweights such as Siemens, Bosch and BASF currently do business in the Russian federation while only about 1,300 Russia firms are active in Germany.

Deutsche Bahn logo

Russian Railways is said to be helping Deutsche Bahn to privatize

That could soon change. In 2000, Russian companies invested some $20 billion (30 billion euros) abroad. This year, it will most likely reach the $200 billion threshold. Germany will also certainly stay in the sights of Russian investors.

It's expected, for instance, that Russian Railways will be actively involved in the privatization of its German counterpart, Deutsche Bahn. More investments are also likely in the biotechnology sector where Russian companies hold many patents which they haven’t yet been marketed elsewhere.



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