Russia still plays an important role as an energy supplier to Germany, but it is rapidly losing its former importance for German companies as an export market. However, German companies more than make up for losses in the Russian Federation as well as Belarus, thanks to growing trade with Poland, the Czech Republic and other EU members in Eastern Europe. At the same time, the importance of economic cooperation with Central Asian and South Caucasian countries is growing rapidly. And the war-torn business with Ukraine is not as bad as one might expect.

Eastern Europe is more important to the German economy than China

These are the main conclusions of the German foreign trade statistics for the 1st half of 2022, presented by the Eastern Committee of the German Economy (Ost-Ausschuss der Deutschen Wirtschaft). This influential business organization lobbies for the interests of German companies doing business with 29 former socialist countries in Eastern Europe and post-Soviet states. The Eastern Committee has direct access to the database of the German Federal Statistical Office (Destatis) and the exclusive right to publish statistics relating to the region in which it works.

In the 1st half of 2022, trade with this region, despite “difficult political conditions”, continued to develop successfully, grew 14% year-on-year to almost €280 billion and set new records both in exports and on imports, underlines the Eastern Committee’s press release.

At the same time, Poland and the Czech Republic, Germany’s two main economic partners in the region, which together account for almost half of foreign trade turnover, acted again as engines of growth. And if we add the other two members of the so-called Visegrad Group – Hungary and Slovakia, the total volume of export and import operations with these four Eastern European EU members amounted to 186.6 billion euros, indicates the Eastern Committee. For comparison, he cites the turnover of Germany’s foreign trade with China in the first six months of this year: 149 billion euros.

Trade with Russia: Expensive energy resources and a collapse in exports

Due to the war in Ukraine, Adidas no longer exports to Russia and has closed its branded stores there.

Therefore, the export income that German companies received less compared to the first half of last year in Russia (minus 4.4 billion euros) and Belarus (minus 250 million euros), purely statistically more than offset a increase in sales to Poland (up €6 billion) and the Czech Republic (up €3.9 billion), according to a press release.

In percentage terms, German exports to the Russian Federation fell by 34.5% to €8.3 billion in the six months (January and most of February were still under normal and peaceful conditions). Such a low level of sales of Made in Germany products on the Russian market was in 2004, recalls the Eastern Committee.

At the same time, imports from Russia to Germany grew by 51.3%, but this is not due to an increase in physical volumes of deliveries (they decreased by almost a quarter), but to a sharp increase in the cost of exporting Russian products, mainly gas, as well as oil and coal. Thus, the published statistics fully confirm the thesis that Gazprom and other Russian raw materials companies have been supplying less to the German market in recent months, but thanks to extremely high prices, they have gained more from it. For the purchase of Russian products, mainly energy, Germany spent 22.6 billion euros in six months.

Trade volumes with Russia will fall in the second half of 2022

The Nord Stream receiving terminal in Lubmin. Gazprom now supplies much less gas

“In the second half of 2022, German exports to Russia will likely continue to decline, as the obligations of previously concluded contracts have already been fulfilled, more and more new areas of trade are subject to sanctions, and many companies have reduced their business in Russia. “, points out the Eastern Committee. At the same time, he expects “a significant reduction in imports of raw materials from Russia” in the coming months. After all, a coal embargo has been in place since August 10, oil imports are expected to stop by the end of the year, and furthermore, “since June, contrary to existing long-term obligations, Russia has greatly reduced gas transit.” by the Nord Pipeline flow.

Thus, Russia is rapidly losing its former importance to German businesses, both as a sales market and as an energy supplier. Polish, Czech and other Eastern European importers can replace Russian buyers and compensate German companies for export losses in the Russian Federation, as the statistics presented convincingly show. But who could, at least partially, replace Russian energy carriers, especially oil?

Germany increases oil purchases from Kazakhstan and Azerbaijan

In the statistics presented, it is noteworthy that in the 1st half of the year, Germany increased imports from Azerbaijan by 342% and from Kazakhstan by more than 92%. In the first case, such an impressive increase, together with the aforementioned increase in oil prices, is largely due to the low base effect: Azerbaijan’s supply has increased from 209 million euros last year to more than 922 million euros. euros this year. As for Kazakhstan, here the real doubling has already been achieved from a relatively high starting level.

Oil production at the Kashagan field in the Caspian Sea off the coast of Kazakhstan

If in the first six months of last year Kazakhstan exported products worth 1.65 billion euros to the German market, this time deliveries for the same period totaled 3.17 billion euros. At the same time, Kazakh importers increased their purchases of German products by 46% to €948 million. As a result, trade between the two countries grew by 79% to €4.11 billion – and Kazakhstan, having overtaken Ukraine, suffering from Russian aggression, became Germany’s second most important trading partner in the post-war space. Soviet after Russia.

The importance of Central Asian countries is growing, the Eastern Committee highlights and points to the “substantial potential” of both Kazakhstan and Uzbekistan, with trade with which, although still at a low level, more than doubled and exceeded 600 million euros. . The turnover with the three countries of the South Caucasus has increased remarkably – not only with Azerbaijan, but also with Georgia and Armenia. “It can be assumed that this region will also benefit from the desire of companies to find alternatives to Russia now,” believes the Eastern Committee on the German Economy.

Ukraine remained an important trading partner for Germany during the war.

In its press release, this business organization specifically refers to the “relatively stable development of economic relations with Ukraine”. Despite the large-scale war, bilateral trade managed to be saved from a landslide: it fell “only” by 10.9% to around €3.54 billion. At the same time, Ukrainian companies almost kept exports to Germany at the level of last year – it decreased by only 4.6% to 1.42 billion euros.

The factory of the German company Leoni near Lviv produces cables for German car manufacturers

According to the executive director of the Eastern Committee Michael Harms (Michael Harms), “German companies in areas less affected by the war are doing everything so that production and business can continue”. Thus, the supply of components to the German automotive industry was re-established. German deliveries to Ukraine fell more sharply – 14.7% to 2.11 billion euros. However, this is still more than double what was sold this year to Kazakhstan.

At the moment, the report says, the Eastern Committee, in close cooperation with the German government, is preparing, together with other organizations in the business community, the 6th German-Ukrainian Economic Conference, which will be held in Berlin in October. . “It would be completely wrong to dismiss Ukraine as an investment destination. Internationally, there is a strong willingness to support the Ukrainian economy now. A smartly structured and transparent recovery plan with clearly defined goals will be decisive”, emphasizes Michael Prejudica.