Ships, Chips and Automobiles

Recently, Germany has been opening its doors to Kremlin-linked companies looking for technologies in automotive manufacturing, shipbuilding, and microchip production. But while the current German election campaign entails that any investors promising to save jobs are welcomed, this new openness could also point to an economic, European dimension to the renowned "reset" in Russian-American relations.

"It is a very good political signal," Arkady Dvorkovich, economic adviser to Prime Minister Vladimir Putin, said on September 16, referring to the deal that will see Russia's state-owned Sberbank and Canadian car components producer Magna take a majority stake in Opel, the European subsidiary of the bankrupt US car giant General Motors. "It means the US administration is ready for maximum economic cooperation with us," Dvorkovich said at the Reuters Russia Investment Summit. Following bankruptcy, General Motors is now owned by the US Treasury.

According to Dvorkovich, powerful anti-Russian interest groups were out to scupper the deal, accounting for General Motors' down-to-the-wire hesitancy over going through with it. But President Barack Obama's support for the Russian bid tipped the scales, Dvorkovich said.
It is very what the Kremlin wants from the deals. "If the import of technologies does not take place, it will mean that (the deal) was just a waste of time," Sberbank CEO German Gref told journalists on Friday.

Two other deals similar to the Opel rescue have been broached by the Russians during the summer. Both involve opaque, Kremlin-linked structures bailing out struggling German companies which, despite their losses, have technologies the Russians want.

On September 18 the media reported that Russia's largest telecommunications holding AFK Sistema is negotiating to purchase a share in Infineon, the largest German microchip producer. According to the Kommersant business daily, the deal currently under discussion is for Sistema to acquire 15 to 20pc of the company for ^1bn, with the purchase funded by the Russian Bank for Development (VEB) state corporation. In a smaller but similar deal, the former Russian energy minister, Igor Yussufov, is set to acquire Germany's bankrupt Wadan shipyards, based in Wismar and Rostock.

It is widely believed that Yussufov is acting on behalf of Russian state-linked strategic investors, including the state-owned gas giant Gazprom and the state-owned United Shipbuilding Corporation. The financially stricken Wadan shipyards possess unique ice-breaking technologies that Russia needs to retool its naval shipyards in order to build transport vessels for energy projects in the Arctic.

Do these deals mark an economic, European dimension to the so-called reset? On Friday Putin called on Obama to follow up on the cancellation of the missile shield plans by supporting Russia's bid to join the WTO - the longest bid in the history of the organisation, with Russia being the largest economy to remain outside the WTO.

The former German chancellor Gerhard Schroeder has stated openly that the United States has been blocking Russia's WTO accession for political reasons. Obama's position on Russia's WTO bid might show whether the reset can develop an economic dimension.

An American reset on Russia's WTO bid will also have knock-on effects for Russian-European ties, since the signing of a new Russian-EU partnership agreement is largely dependent on Russia's achieving WTO membership.

Graham Stack is a business journalist and analyst.

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