In Moscow’s dazzling shopping world, after the war-related departure of some large Western chains, others have long since taken over the stores. Unlike after the sanctions began, there is hardly any vacancy left in the Yevropeysky shopping center in the heart of Moscow. There is fashion from Turkey, technology from Miele and Apple, including the latest iPhone. A lot of things that shouldn’t actually exist end up in the vast empire via parallel imports from third countries. Two years after the start of the war, the world of goods leaves nothing to be desired, as Muscovites emphasize in discussions.
State television repeatedly says that the sanctions imposed by the West in the wake of Russia’s war of aggression against Ukraine hurt the people in the EU significantly more than the raw materials power. In addition to oil and gas, there is also everything else needed to survive.
Two years after the start of the invasion, which Kremlin chief Vladimir Putin ordered on February 24, 2022, the war economy is in full swing. Consumption is booming. The president emphasizes that the West has failed with its unprecedented sanctions.
Many Western companies, especially large ones such as Siemens, VW and Mercedes, have withdrawn from the Russian market and sold their businesses – mostly at massive discounts. Nevertheless, the majority of German companies continue to operate in Russia. They don’t want to or can’t simply ignore the billions of euros in investments they’ve made over the years.
German companies also continue to do business in Russia
The wholesale company Metro, for example, defends remaining in Russia. “We bear responsibility for our approximately 9,000 local employees and supply many of our small and medium-sized customers – i.e. restaurants and retailers – with food,” said a spokesman. According to the company, there has been no growth investment in Russia since the start of the war.
“We condemn the war in the strongest possible terms,” said Metro boss Steffen Greubel at the general meeting in early February. At the same time, he referred to foreign companies that wanted to leave Russia and were “forcibly expropriated”. It is not in one’s own interest to leave the business to oligarchs close to the Russian government, said Greubel. Metro has 93 stores in Russia, 89 of which are owned.
The war still left its mark on Metro. Sales in the 2022/23 financial year fell significantly by 7.9 percent in local currency as a result of the purchasing reluctance, and reported sales fell even more sharply (minus 13.6 percent) due to negative exchange rate effects. At Metro, the negative trend is expected to continue.
Sharp decline in German trade with Russia
According to the Eastern Committee of the German Economy, trade with Russia as a whole recorded a historically unprecedented slump of 75 percent last year. The raw materials power, once an important gas and oil supplier for Germany, fell to 38th place among trading partners behind Slovenia (2022: 14th place). German trade with Russia shrank by three quarters to 12.6 billion euros in 2023 as a result of the sanctions. “Imports, which were previously dominated by energy sources, fell by 90 percent to just 3.7 billion euros after the start of the oil embargo in early 2023,” it said.
However, hundreds of German companies are still represented in Russia – especially in areas where Western sanctions do not apply, in order not to harm ordinary people in the largest country in the world by area. Examples include the food, agriculture, health and pharmaceutical sectors. But overall the situation is considered extremely unstable.
Fears of Putin’s compulsory administration or expropriation
Globus, for example, only operates food markets in Russia. Investments were reduced “early and significantly”. “Nevertheless, the markets continue to make a contribution to the basic needs of the Russian civilian population,” said a spokeswoman when asked. “In addition, various examples and passed laws show that withdrawal from the Russian market can lead to the expropriation of companies, which would result in the Russian state losing significant assets.”
Such fears that companies will be placed under receivership by Putin’s decree have persisted since Russia took control of the two international brands Danone and Carlsberg. Even for companies that are not affected by sanctions, the question arises as to whether it is justifiable to remain in the country. In Ukraine, Western companies that continue to do business in Russia are sometimes publicly branded as “sponsors of war.”
Ritter Sport also came under criticism for continuing to deliver chocolate to Russia. The company decided to stop investing in the Russian market, stop advertising and donate profits from Russia to humanitarian aid organizations. Russia was again Ritter Sport’s largest sales market after Germany in 2023 – albeit with a slight decline in sales.
Russians value German products
Many Russians value German goods. “Everything has become very expensive,” complains a senior citizen in the Perekryostok supermarket at the Kiev train station in Moscow. Even with her comparatively good Moscow pension of around 300 euros, she can’t afford everything. She has kefir, milk and cheese from the German entrepreneur Stefan Dürr’s dairy in her basket. The Baden-Württemberg native, who is the administrative head of the Russian dairy association Soyuzmoloko and the country’s largest producer with the company EkoNiva, has his photo printed on the packaging as a trademark.
But for younger Muscovites with higher incomes and other needs, hurdles sometimes arise because of the sanctions. “Because of the sanctions, computer programs, for example, cannot simply continue to be used as they were before the sanctions,” says the young graphic artist Andrej. Here it is not only necessary to bypass the Russian part of the Internet through a VPN server in order to be able to use graphics programs, for example. Paying for software subscriptions has also become more complicated.
Sanctions are often circumvented
Because Visa and Mastercard have shut down their systems in Russia and many banks are also disconnected from the international financial communications network Swift, payments can no longer be processed easily. Andrej opened an account in the former Soviet republic of Uzbekistan in order to purchase and pay for his software online and with a Visa card.
But for rich Russians who can afford long stays in Dubai, Thailand and elsewhere, the possibilities are considered unlimited anyway. They smile away the sanctions. Wealthy people can still order any model in Moscow’s car dealerships and also shop in luxury department stores and high-end boutiques from international designers. They always find ways to circumvent sanctions. As Putin once said, despite the punitive measures, everything continues as before the war. In the end it’s just a question of money.
