79OoF7ZHw

RUSSIAGERMANY
# 7 (49) 2014
THE KEY TO RESTORING CONFIDENCE | FASHION PRODIGY REDEFINES RE-
TAILING | AGRICULTURAL REVOLUTION | THE DRIVE TO LOCALIZE | TURNING
UP THE EXPORT VOLUME | CHEMICAL INNOVATION | THE BEST OF EUROPEAN
HOSPITALITY | LOVERS OF LITERATURE UNITE | CONSCIOUS MANAGEMENT

RUSSIA — GERMANY | 3
СEO Jean-Emmanuel de Witt
Publisher Ekaterina Movsumova
Editor Mark Gay
Translations Luba Summ
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Head of Special Project Department
Alla Naumova, a.naumova@imedia.ru
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Publication produced in collaboration with
the German — Russian Chamber of Commerce
Issue No. 7 (49)
Publication Date October 2014
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It’s a challenging time for German and
Russian businesses, especially smaller
and mid-sized companies. Some had
recently localized production in Russia,
making long-term commitments
to the country. Large investment funds
had been looking for prospects in the
real estate market. Now some of these
investors have put their plans on hold.
Others worry that business will not
remain independent of politics, and
that ‘national security’ will be used as
an excuse to create new regulations and to cripple competitors.
Business associations warn that China will gain from Europe’s
sanctions policy, while the Russian government has expanded
restrictions on some western imports and is encouraging suppliers
from other parts of the world.
Yet the main message we have heard is that long-term relationships
will survive the crisis. On a cultural level, Russians
have a greater understanding with Germany and Europe than
with China. In purely monetary terms, Russia achieves better
prices for its resources in Europe, which is more easily and
cheaply supplied with energy from Russia. The EU and Russia
Mark Gay
are interdependent. In commercial terms,
EU companies benefit as Russian living
standards rise.
However the interdependence goes
much further than many European and
American policy analysts assume. In
terms of civil society, the EU can only advance
if Russia advances.
During the cold war, western governments
made concessions to their populations
because western governments feared
the influence of communism. Since its
collapse, Europe and the U.S. have seen
the decline of social mobility, the shrinking
of the corporate pension system, a
reduction in welfare programs, the concentration
of wealth – and even attempts
to undermine the universal rights of man
that are the great achievement of the Enlightenment.
There are many people, from the
German boardrooms to the Russian
boulevards, who are convinced that they
share common values, and gain mutual
benefit from trade and travel. A close relationship
is inevitable and they are ready
to nurture it.

4 | RUSSIA — GERMANY
GOODWILL IS THE KEY
TO RESTORING CONFIDENCE
THE GERMAN
AMBASSADOR
TO THE RUSSIAN
FEDERATION,
RÜDIGER FREIHERR
VON FRITSCH,
WRITES THAT THE
CURRENT POLITICAL
SITUATION IS A
CHALLENGE FOR
BOTH COUNTRIES.
Germany and Russia have a long-standing
and close relationship. Economic exchange
plays a special role. Our economy needs
fossil fuels, the noble and non-ferrous
metals, as well as rare earth elements, which
Russia has in such abundance. German
companies offer a superb opportunity for
innovation and investment in Russia at
almost all stages of the value chain.
About six thousand German companies
and companies with German capital
were operating in the Russian Federation
at the end of last year. They provide jobs
for almost 300,000 employees; in financial
terms their turnover amounted to approximately
40 billion euros. At the same
time, Russian companies are investing
more and more in Germany.
We want to awaken interest in a good
and close relationship especially among
young people in our countries. Here is
one example: the German Embassy, our
Chamber of Commerce, the German
Academic Exchange Service (DAAD)
and the Higher School of Economics in
have responded to this in order to limit
these effects and to return to rule-based
coexistence.
The tangible result of these developments
has been the deterioration of the
political framework for German-Russian
economic relations and Russia’s international
economic relations in general.
Many companies are wondering what will
happen next and how to prepare. They are
rethinking their actions, and are slower to
decide on new investments.
Economics and politics are closely
entwined with each other. The economy
depends on a certain minimum level of
legal security and trust, which politics
should ensure. It should provide stability
and transparency in the economy. Honest
and open dialogue is a prerequisite. Germany
has always considered this exchange
important and necessary, and stands ready
to continue it.
Two million people in Russia are
learning German and thus also showing
an interest in our culture and our country.
We are pleased with this. We not only
want to save the bridge, but also to expand
it. Therefore, a few days ago in Moscow
there opened the “Year of the German
language and literature,” a series of different
events throughout Russia. We want,
together with the Goethe Institut, to show
why you should learn German, and what
riches the German language and literature
contains. In parallel, in Germany we are
NO ONE EXPECTED PEACEFUL COEXISTENCE
IN EUROPE COULD BE SUBJECTED TO SUCH
A SHOCK... THIS PARTNERSHIP IS UNDERGOING
A TEST OF ITS DURABILITY.
Moscow jointly developed a program that
allows students from Germany to gain
experience with German companies in
Russia. Another example: to counter the
increasing lack of qualified specialists in
Russia, there are plans to introduce a dual
system of education according to the German
example.
These examples demonstrate that our
countries are willing to cooperate, and the
will to learn from each other remains consistently
high.
The challenge for relations between
our two countries is the current political
situation, which is a consequence of actions
contrary to international law, namely
the annexation of the Crimea and Russia’s
actions in the conflict in Ukraine.
The loss of confidence, which has
arisen in connection with the violation
of the fundamental principles of co-existence,
is real. Germany and its partners
celebrating the Year of Russian language
and literature, which has given so much to
our own literature. In this way we promote
exchange and dialogue and awaken interest
in each other.
A short time ago, probably no one
expected that peaceful coexistence in Europe
could be subjected to such a shock.
It seemed that the post-war period and
the Cold War had already passed, and the
partnership between Russia and Germany
could not be overshadowed. This partnership
is currently undergoing a test of its
durability.
But we continue to believe that we
will be able to return to trusted and stable
relations between our countries, if there is
the goodwill to renegotiate the hard rules
of coexistence and thereby restore confidence.
In the long term there is no alternative
to good German-Russian relations.
We can only win from them.

RUSSIA — GERMANY | 5
RETAILERS DRIVE CHANGE
IN DELIVERY SECTOR
LOGISTICS COMPANIES ARE ADDING HIGH QUALITY, ADDITIONAL SERVICES
AS RETAIL AND INDUSTRIAL MARKETS EVOLVE, SAYS ANATOLY GVOZDEV,
MANAGING DIRECTOR AT DB SCHENKER RUSSIA (ZAO SCHENKER).
Has logistics and delivery changed in
Russia over the past decade?
With the fabulous retail growth, we see
competition to upgrade services and meet
clients’ demands in terms of transport
quality. There is a remarkable improvement
on the part of local logistics companies.
Shipment size is going down in parallel
with growing demand for additional services
of higher quality, to which the logistics
service provider must respond. This
means sorting, labeling, interim storage,
return logistics, transfers, forwarding,
time windows deliveries, and so on.
How did you develop the service that you
offer to retailers? How has it evolved?
We spent considerable time with our
customers and the suppliers to the retail
chains, working out how our mutual services
can best meet the needs of specific
retail chains. This included consulting,
training and entry support, deep integration
into the logistics process of selected
major retailers. This, in turn, included
pre-agreed, standard operating proceedures,
placing our own staff at the handover
points and distribution centers of the
chains, and so on.
We implemented an e-documents
library where the customers can see electronic
proof of delivery and scans of transport
and commodity documents within
two days after delivery. We are working
on shortening these terms. Another great
feature is our tracking system, including
on-line scheduling and delivery reports.
Implementation and development of the
e-booking system is coming next in our
short-term plans.
It is quite obvious for us that Russian
retail is moving into the online sector. Our
first reaction was to prepare the physical
platform on which such services could
be realized. I would not call us a pioneer
in this area but we clearly understand its
importance and we will be expanding our
services in that area for our customers.
One big change in European and US
retailing is same-day delivery, which is
a revolution in the industry. What are the
challenges to bringing this to Russia?
We do not see evidence that suppliers and
retailers are ready to implement it in Russia
yet. However, there are other vertical
markets like automotive, which is in the
top three of the biggest markets in the
country, where this or even more specific
solutions like just-in-time and just-insequence
delivery are required and have
already been implemented.
Anatoly Gvozdev | ZAO SCHENKER
Would you welcome the development
of more regional transport hubs across
Russia, for example at Khabarovsk?
We don’t just welcome but we are fully
supporting this trend. We provide our contract
logistics services in several branches
and carry out our cross-docking operations
in 24 locations around Russia. Our
current network is built up to cover 80 per
cent of the consumer market in the country,
primarily in the European, Urals and
Western Siberia areas. Our next targets lie
in Eastern Siberia and the Far East and
our future hopes also lie with road—rail
services, especially with so-called contrailer
solutions between European and
Asian parts of Russia. Railroad and airfreight
bridges shall connect them to provide
accessibility and full control within
the distribution chain for our customers
in Russia.

6 | RUSSIA — GERMANY
BUSINESS WILL OVERCOME ECONOMIC
AND POLITICAL OBSTACLES
RUSSIAN INDUSTRY HAS ALLIES WHO UNDER STAND
THE LONG-TERM IMPORTANCE OF TRADE, SAYS
MICHAEL HARMS, CHAIR MAN OF THE GERMAN-
RUSSIAN CHAMBER OF COMMERCE, AHK. BUT HE IS
CONCERNED THAT BUSINESS IS BEING POLITI CIZED.
HE TOLD MARK GAY THAT LONG-TERM TRUST IN THE
RUSSIAN MARKET MUST BE REPAIRED.
Michael Harms | AHK
The media usually focus on consumer
goods and overlook other sectors like
chemicals, machine tools and heavy industry.
How do you categorize Russian-
German trade and which are the unsung
heroes?
We can summarize it as advanced
manufacturing: equipment for the food
sector, electro technical equipment,
measuring equipment and in particular
machinery and chemicals. Germany is not
as strong as the United States in software.
But with these hidden champions,
machinery and tools, Germany is not only
the leader on the Russian market but also
the world leader. Consumers do not see
these products but they are essential for
the running of the oil and gas industry
and Russian domestic industry and here
the main investors are the private Russian
investors in the food industry for example.
Most food processing machines come from
Germany or Italy.
We could summarize this as three
sectors: advanced manufacturing, hidden
champions and industry 4.0, the Internet
of things or the merger of software and industrial
production.
heritage in some branches of industry like
aircraft and space. They have leading companies
worldwide in the software market
and the extraction of oil and gas so there
are some interesting branches which can
be developed with German and western
partners.
There is no special German approach
to the Russian market but their mentality
is quite close, and Germans like the Russian
style of communication and doing
business.
German industry seems to have an
understanding of the Russian market.
Maybe destiny is too grand a word –
perhaps a future that cannot be avoided
in terms of trading with the east. Is there
a gap between the thinking of business
people and politicians?
With Germany being in the heart of
Europe and having these traditional ties
with the east it is a kind of destiny, a future
and an opportunity to expand beyond their
own market and explore this huge market
for German companies.
I would not say that German politicians
do not understand the need for a
strategic approach. We were one of the
first countries that defined the Partnership
for Modernization with Russia, which
German foreign minister Frank-Walter
Steinmeier proposed five years before other
such plans. Politicians realize that with
the European Union Russia can be one of
the most influential economic blocs. We
need free trade with Russia but all these
things are now questioned by the political
crisis. On the one hand we know about the
strategic importance of the Russian market,
on the other we have certain values
that are threatened by the crisis.
Which values do you mean?
The values of European stability, security
and peace. These are threatened by the
Ukrainian crisis and we cannot avoid this
discussion. There is no difference on the
importance of having a long-term strategic
partnership with Russia on both the
political and business levels.
One strength of German business is the
Mittelstand, the small and mid-sized
companies. What can Russia learn
from this?
The structure of industry is very different.
Most Russian SMEs are in services and
local industry, unlike German mid-sized
companies that are active in industry and
on a global level. To transfer this whole
philosophy and the whole structure is not
easy. Even the United States does not have
such an SME sector, which is a feature of
German or German-speaking countries
predominantly, though also in Italy.
On the other hand the question of the
Russian SME sector is in the first instance
a question of business climate. You need
low transaction costs, a stable business
environment and economic freedom. You
do not need too much state interference or
the dominance of large state-owned monopolies.
Unfortunately we have all these
things in Russia. Politicians clearly see this
problem; prime ministers and presidents
have mentioned this in their speeches for
10 years now.
Have German companies cut their forecasts
regarding the Russian market or is
the situation too fluid for such forecasts?
We have three main factors that have
lead to a deterioration of expectations
How do German companies identify
the changes and needs of the Russian
market?
Russian industry is now part of the global
market. It is no longer true that Russian
industry can do everything on its own.
Competitive, global companies, for example
progressive, technology-driven companies
like Russian Helicopters rely on global
suppliers, partners and global markets.
Russian industry as a whole is not
competitive on the world market. You
can see this from the structure of Russian
exports: it is mostly oil and gas with very
few manufactured products. The government
has identified the problem and Russian
industry is modernizing. It has a good
STATISTICS
Bilateral Trade between Russia and Germany
(First half) 2012 2013 2014 change from
previous year, %
Imports to Russia, million tonnes 2.9 2.6 2.3 -14.2
Imports to Russia, billion EUR 18.2 18.1 15.3 -18.4
Exports to Germany, million tonnes 42.5 40.8 43.9 7.1
Exports to Germany, billion EUR 21.7 19.9 20.3 2.0
Trading Volume, billion EUR 39.9 37.9 35.5 -6.7
Source: AHK

RUSSIA — GERMANY | 7
towards the Russian market for all foreign
companies. This is the slowdown of growth
in Russia since last summer. The second
thing is the devaluation of the ruble that
affected exports and made more expensive
the import of parts from the euro zone.
The third thing is this political uncertainty.
Together, these have led to a gloomier
picture than a year ago.
From our assessments and questionnaires,
business is still going quite well for
most branches of industry but it is clear we
will not see major growth. Some branches
or companies will see a slowdown in both
revenue and profits, for example the automotive
industry. Some German companies
which provide equipment to private Russian
investors in the steel and metallurgical
industries are also suffering because the
Russian groups are not investing and the
world steel market is in a difficult position.
How much is due to the ongoing global
financial crisis and how much due to the
political crisis?
Mostly the problem is still growth and the
ruble. The political situation got worse after
the last round of sanctions. While we had
level one and two sanctions aimed at specific
individuals it was not such a problem for
companies already active on the market.
The bigger problem is the lack of longterm
trust that a lot of German investors
have felt towards the Russian market: confidence
in a stable business framework.
Over all, has the drive towards protectionism,
which many people predicted at
the start of the financial crisis, begun to
accelerate?
I think so. We are very concerned about
the tendency for much more protectionism
on the Russian market. It began after the
WTO accession when Russian industry put
politicians under pressure because industry
is still not very competitive. What is clear
form my perspective is the loss of jobs and
Russian companies to the world market
and they wanted to protect industry,
for example the vehicle scrappage fees,
regulations on medical equipment and
restrictions on agricultural machinery, and
now it is speeding up. Before it was just the
economic question but now we will have
arguments about national security, that
Russia should build up its own industry for
“national security”. This is a very strange
argument because Russian industry can be
competitive only if it is open to the world
markets. If you protect your industry it
is the direct path to stagnation: we saw it
in the Soviet Union and we see it in any
country that tries to close its economy.
Are the Russian markets more open now
than they were before WTO? Do you still
see a net benefit?
If you look at the level of import duties we
clearly see an advantage. We have a more
stable framework, the inclusion of Russia
in the WTO system, clear regulations
and we are solving trade disputes but
unfortunately nowadays we have emerging
signs of a reverse development. It is still too
early to assess the reform process.
More German companies have begun
to localize part of their operations in
Russia, even mid-sized companies. Can
localization provide a way around sanctions
or disruptions to trade flows?
It is partly a strategic trend because Russia
has big enough markets that you can localize
here. Also you have the Eurasian Economic
Community space and, previously, the
Ukrainian market. You have all the
advantages of being a Russian producer,
with some government support, no foreign
exchange rates to worry about, no customs,
and so it is the right trend especially for
industries in electrical technologies,
GROWTH AND STABILITY, IN POLITICS AND
BUSINESS, ARE THE BEST CONDITIONS FOR
LOCALIZATION. BOTH THESE THINGS ARE NOW
UNDER QUESTION.
agricultural machinery, automotive. But the
best conditions for this are those of growth
and of stability, in politics and business, and
both these things are now under question.
Several German companies have halted
their plans to invest because of the slowdown
in growth and the political situation.
Does the EEC have any advantage for
business in terms of harmonized taxes in
the Eurasian area?
I think it is a very positive trend. You have
a bigger market with more or less common
regulations. You have import duties
with the same technical regulations and
standards so you have more reliability in
foreign trade. We had very close interaction
with the regulation commission (that
established the common regulations) and
it had very qualified individuals. The dialog
on technical regulations went quite well
but further progress may be on hold.
Have Russian customs staff improved
their performance?
There are still al lot of problems but things
are getting better. For example the use
of electronic forms is working better and
better and they have moved almost all of
the customs stations away from Moscow
and closer to the borders where goods enter
the country. This is much more efficient.
I would not say there is no corruption but
there is less and we see fewer complaints
from German businesses.
Bavarian Ministry of
Economic Affairs
and Media,
Energy and Technology

8 | RUSSIA — GERMANY
EUROPE WILL TRUMP BRICS AS
THE NATURAL TRADING PARTNER
Prof D r Rainer Lindner | OST-AUSSCHUSS
In the face of sanctions, Russia banned
agricultural products from a number of
EU and western suppliers for one year
and turned to rival supplies, including
the BRICS. Could this reshape the trading
landscape?
If the sanctions remained in force for a year
or longer, they would have a considerable
impact on the European trading structure.
Both parties would address new clients
permanently and look for new suppliers
as well. However, the quality of products
and services would probably not be as high
and costs might also rise. Otherwise, firms
would already have chosen to work with
these suppliers.
If the Shanghai Cooperation Organization
agrees to expand its membership
will this represent a shift in the center of
global power and commerce from west
to east?
China certainly is the one standing on
the sideline laughing while Europe and
Russia are caught in a serious conflict.
At the moment China is able to increase
its economic influence in Russia and
access Russian resources at lower costs.
Nonetheless, Russia is a mere junior
partner for more than a billion of Chinese
people, a fact which is well understood in
Russia. Hence, in the long run we should
strive to build a common economic space
among Russia and the EU. This is the only
way Europeans will have their share of the
global economy.
Does it benefit Russia to sell more of its
gas to China and the east?
Russia can achieve the best prices for its
resources in the EU. This will not change in
THE GERMAN COMMITTEE ON EASTERN
EUROPEAN ECONOMIC RELATIONS (OST-
AUSSCHUSS DER DEUTSCHEN WIRTSCHAFT)
WAS FOUNDED IN 1952, AND PROMOTES
TIES WITH RUSSIA ON BEHALF OF BUSINESS.
PROF D R RAINER LINDNER, ITS MANAGING
DIRECTOR, SPOKE TO MARK GAY.
the long run. Therefore, turning away from
the EU market will be disadvantageous
for Russia on the one hand. On the other
hand, the EU is highly dependent on
Russian energy supplies. Over 40 years a
mutual dependence has grown and worked
very well. I strongly hope that as a result
reason will win and a compromise which
leads to a continued successful partnership
will be agreed.
Is there a danger that instead of rival
trading blocs, we will see a retreat
behind trade barriers, into the kind of
fortress economy that both India and
Russia tried in the past?
Certainly, the danger of becoming trapped
in a new wave of protectionism is fairly high.
In Russia there has been a range of measures
currently employed which very much worry
our companies, for example the local content
regulations. The compartmentalization of
markets may be successful for a short period
of time; however, if this happens to all
markets, we stifle the global business cycle.
Russia will only be able to modernize its
economy in a successful way if it stays open
to modern technology.
On the other hand, could world trade
benefit from a rebalancing, that is already
happening in the consumer goods
sector with the growth of the middle
class in developing countries?
The emergence of a middle class in
Russia fostered foreign investment.
Foreign investors came to the country
and contributed significantly to economic
growth in Russia. For instance, German
companies created around 250,000 jobs
in Russia. The example highlights that
the integration of the Russian market in
the global economy certainly has positive
effects which would be jeopardized by
protectionism.
Cynics might argue that some interests
in the west do not want Russia to develop
into a rival economic force. That they can
WE SHOULD NEGOTIATE A COMMON EUROPEAN
FREE TRADE ZONE. THIS WOULD BE THE BEST
SOLUTION FOR THE RUSSIAN AND EUROPEAN
ECONOMIES.
Gazprom’s LNG plant in Sakhalin is intended
to help sell more gas to China. But Russia
gets the best price for its energy from Europe
| GAZPROM
profit just as much from an autocratic
Russia, which exports raw materials and
simply buys lots of consumer goods and
technology from the west, without actually
developing any significant self-sufficiency.
On the contrary: The better Russia
develops economically, the higher the
people´s income, the more interesting it
becomes for foreign companies as they
will be able to sell more products. Thus,
the EU is highly interested in the positive
economic development of Russia. We
all are interdependent. A crisis in the EU
has negative impacts on Russia, the same
way a crisis in Russia hampers the Western
economy. We are all in the same boat.
The EU’s Eastern Partnership program
promotes the harmonization of laws and
its partners include countries like Armenia.
As Armenia also plans to join the
Customs Union or the Eurasian Economic
Community — do you think these two
ambitions will conflict?
We would like to see the Eurasian
Economic Union and the European
Union harmonizing their customs and
trading rules. We should start negotiations
about a common European free trade
zone. Countries such as Moldova, Ukraine
or Armenia would no longer be forced to
choose between one or another side. This
would be the best solution for the European
and Russian economies.
Could the EU and the Eurasian Economic
Community combine their positive advantages
through any joint approach or
program?
Yes, in our opinion there is a great
chance. Concrete talks about a common
economic space and the abolishment of
visa requirements were been taking place
in 2003. We should revive this process.
In which areas could the EU and the EEC
achieve their greatest impact?
We should work on a mutual abolishment
of visa requirements and on a harmonization
of licensing procedures for new
products. We would save an enormous
amount of money and reduce bureaucracy
significantly. Another task would also be
the development of new mining sites and
the efficient extraction of raw material.
Additionally, we need one European
transport infrastructure.

RUSSIA — GERMANY | 9
GERMANY PLAYS KEY ROLE
IN UKRAINE CRISIS
Since the conflict was originally rooted in
the issue of the association treaty with the
European Union, it is logical that Germany
offered itself, alongside France and Poland,
as a go-between.
But soon after President Yanukovych
was ousted from his office, Germany faced a
new challenge posed by Russia’s increasing
influence upon Ukrainian affairs. This became
more obvious through the annexation
of Crimea and the support from Moscow for
the secessionist forces in southeast Ukraine.
As for the German government, it was
fully aware of the possible consequences
for its bilateral relations with Russia. It was
clear that Moscow might confront Berlin
with reciprocal measures, which as major
economic partners might be powerful
enough to damage the German economy.
Gas and oil imports come to mind.
Berlin, for its part, pointed out from
the start that the aim of economic sanctions
was not to damage the functioning
of the Russian economy as a whole or to
endanger the standard of living of Russian
people but to target certain individuals and
companies.
It is well known that the West initiated
GERMANY HAS PLAYED AN ACTIVE ROLE AS AN
INTERMEDIARY DURING THE UKRAINE CRISIS.
THE COUNTRY’S FEELINGS TOWARDS RUSSIA
ARE INTRICATE AND COMPLEX, AS INDEPENDENT
ANALYST ALEXANDER SAMBUK EXPLAINS.
sanctions cautiously. But the further development
of the crisis prompts questions
about whether the West’s strategy may have
been based on wrong perceptions from the
very beginning.
The perceptions of politicians in part
reflect the views of public opinion. It is
legitimate to focus on how particular sections
of German society have reacted to the
Ukraine crisis.
For example, many leading figures of
German industry regarded the annexation
of Crimea as a politically unacceptable act
but at the same time, as a one-off affair that
did not prevent them from doing business
as usual. This sentiment prevailed among
the German business community until the
loss of the Malaysian Airlines flight MH-17
over the territory controlled by the separatists
when it conceded to tougher action
against Russia.
Calls for a cautious approach were
partly driven by fears of the negative effects
on the German economy. This was just
one point on a list of arguments advanced
by a loose yet influential group of opinion
leaders, called by the German media Russlandversteher
for their desire to accommodate
Russia’s “legitimate interests”. This
segment of the German public points to
the historically legitimate character of the
Russian special interest in Ukraine. At the
same time it demands that Berlin adopt its
own political course towards Russia in the
Ukraine crisis, distinct from that of Washington.
It would be wrong to assume that
such Russlandversteher come mostly from
the left segment of the German political
Alexander Sambuk | MARK GAY
spectrum, because one can identify echoes
of the 19th century national Romanticism
in the perception of Russia as an enigmatic,
but valuable and desirable partner to Germany
in its geopolitical endeavours.
It is hard to say to what extent public
and social debate has influenced German
strategy in the Ukrainian crisis. However
one can question whether sanctions have
brought about the result desired in Brussels.
Increasingly the West is forced to reconsider
key elements of its policy towards Russia. It
is possible that the approach of the West will
go beyond the formula of gradually stepping
up sanctions if the Ukraine crisis continues
to develop in unexpected ways.

10 | RUSSIA — GERMANY
SOWING AND REAPING
THE BENEFITS OF TECHNOLOGY
A CENTURY-OLD FAMILY BUSINESS IS HELPING TO MODERNIZE
RUSSIAN AGRICULTURE AND INDUSTRY. REGIONAL PRESIDENT
EASTERN EUROPE OF CLAAS GROUP AND GENERAL DIRECTOR
OF CLAAS VOSTOK BERND LUDEWIG TOLD MARK GAY HOW ITS
FACTORY IN THE BLACK EARTH REGION OF KRASNODAR SOURCES
A GROWING PROPORTION OF PARTS FROM LOCAL SUPPLIERS.
Bernd Ludewig | CLAAS
When did you first begin localizing production
in Russia and why?
CLAAS has been in the Russian market
of agricultural machinery for over three
decades. We sold the first self-propelled
forage harvester back in 1984 but modern
history really dates from 1991 when we
sold the first CLAAS harvester in Samara.
So we have a long, common history with
Russia, we know the local market and understand
the needs of our customers who
in return are loyal to the brand.
We have always regarded Russia as
a country with great prospects and potential.
At the same time we are very well
aware of the desire of the Russian leadership
to develop their own local production
of agricultural machinery. So in 2003 it
was decided to build the CLAAS plant in
Krasnodar. Of course, this was preceded
by heated debates and there were proposals
to focus on Latin America. I am very
glad that this decision has been taken and
that we have come to Russia to stay.
And what is your strategy for the
creation of such production and localization
component of the base?
Increasing the amount of localized production
is one of the biggest and most difficult
challenges facing the company. We
are actively working with Russian suppliers
of components. Over 10 years we analyzed
more than 1,400 companies. Unfortunately,
to date, we have only established stable
partnerships with 35 Russian suppliers so
far. Their products meet CLASS’s highest
technical requirements.
In 2010 it was decided to expand the
existing plant and organize the full technological
cycle of production of agricultural
equipment, including welding, painting
and metal working. The volume of investment
in the project exceeds 6 billion
rubles. By 2015, the level of localization at
the CLAAS factory level will significantly
exceed 50 per cent. The capacity of the
plant will increase by two to two-and-ahalf
times and the number of jobs will increase
to 550.
Why did you choose Krasnodar as the
location for your production plant?
We looked at different regions and Krasnodar
region was chosen for a reason.
Kuban showed the best performance in
terms of investment attractiveness. The
regional administration has done much to
create favorable conditions for the arrival
of foreign companies. In addition, it has
a well-developed infrastructure, which is
very important when creating your own
production plant.
And finally, it has a well-developed
agricultural complex. It has a yield of an

RUSSIA — GERMANY | 11
average of 50 quintals (5,000 kilograms) of
grain per hectare. This is a high figure compared
to other territories. However, there
are opportunities for growth here as well.
For example, in Germany we manage to
collect 80 quintals per hectare. One of the
reasons for the higher technological level of
production and the use of modern agricultural
machinery. We are confident that our
machines can help solve this problem.
Have governments resolved the issue of
trade measures on foreign-made combine
harvesters or is this still ongoing?
Indeed, this year there is a limit on the import
of combine harvesters into the countries
of the Customs Union. The Russian
quota is 424 harvesters, of which CLAAS’
share is only 12. Does this sound fair? It
seems to me that it doesn’t. We have completed
our quota for this year and despite
our efforts many of our customers could
not buy the harvesters they needed. Our
position is that the buyer makes his own
choice and decides what kind of techniques
he whats to acquire. You only need
to give him that opportunity. Quotas also
narrow choice and hinder fair competition
in the market.
Could you provide some numbers to
illustrate the volume of your business
here?
Today, the total population of self-propelled
CLAAS vehicles in Russia is about
10 thousand units, according to our calculations.
This includes grain and forage
harvesters, tractors and telescopic handlers.
Since our factory began operating
in 2003 we have released about 5000 units.
Currently in Russia we produce eight
models of TUCANO combines; two models
LEXION combines; and the tractors
AXION, XERION and ARION. We are
represented by dealerships in 57 regions
of the country, which employ more than a
thousand people.
Currently, one of the main goals is
decentralization; we must become more
YOU NEED A LEVEL PLAYING FIELD IN THE
MARKET. TO CREATE A MODERN RUSSIAN
AGRICULTURAL ENGINEERING SECTOR YOU
NEED A FEW COMPANIES THAT ARE ABLE TO
COMPETE WITH EACH OTHER.
reachable for our customers. In general,
we strive to provide our customers with the
same level of European quality of service.
For example, we can deliver an item from
our warehouse in Moscow to any region of
Russia during the day.
The CLAAS Academy has opened in
Voronezh. Could you talk a little bit about
this project?
It’s not enough in today’s market for the
manufacturer just to produce high-quality
innovative techniques. It needs to constantly
upgrade the skills of its professionals
who work with these techniques.
This is especially important for sales staff,
customer service representatives, and, of
course, for those who use our equipment
on the ground. In order to meet this challenge
the CLAAS Academy for the CIS
countries was established in Voronezh.
Today the Academy is an important
part of the corporation, not only in Russia
but throughout the world. The number of
trainees is growing. It trained 900 people
in 2012, and this rose to 1,000 in 2013.
There are plans to build a new Academy
building near Voronezh on 16 hectares of
land.
What is your view of the development of
Russian agriculture with regards to the
agricultural sectors that Claas supplies?
In general, we commend the development
of the agricultural machinery market. The
industry is growing, there is a good potential
for development. Recent events have
drawn attention to agriculture, so you can
count on an additional influx of investment
into the industry. We are confident
about the future and believe in the future
of our business in Russia. The proof of this
is in the large-scale expansion of CLAAS’s
project in Krasnodar with multi-billion
ruble investment and the development of
the dealer network in the regions.
What would help to develop agricultural
machinery in Russia?
First and foremost, you need a level playing
field in the market. After all, to create
a modern Russian agricultural engineering
sector you need a few companies that can
compete with each other for the benefit of
customers. Of course, this should be the
companies that are actively involved in the
localization of production and technology
transfer.
Do subsidies help to promote specific
agricultural sectors – or do they simply
distort the market in the Russian context?
We support initiatives to establish mechanisms
to support companies that have
specific plans to localize its production
in Russia. Formation of clear and understandable
rules for the market are in the
interests of both the manufacturers and
farmers. It is logical that the state pays
greater attention to those projects that are
important for the development of agriculture.
And it seems to me that the creation
and expansion of the plant in Krasnodar is
a good example of such a project.
advertising

12 | RUSSIA — GERMANY
NOWHERE TOO REMOTE
FOR ONLINE FASHION
Nilsen Togzen | LAMODA
Where did the idea to create Lamoda
come from?
By the time when we founded the company,
the Internet as a channel of retail sales
had grown rapidly in the United States and
Great Britain. People realized how convenient
it was to choose from a huge range,
and then get them with free home delivery.
We saw that in Russia this business model
had great potential in the mass-market
segment.
When was the first time you felt like an
entrepreneur?
I became interested in business at an early
age, when I started to read books about
successful entrepreneurs. I admired the
opportunity to build a successful business
out of nothing. At 16 years I started helping
the local German retailers to sell products
online. It was a very interesting time
when the owners of small shops were just
beginning to look closely at the Internet.
WITH CONSULTANT STYLISTS AND CHANGING
FASHION LINES, LAMODA IS AN ECOMMERCE
PHENOMENON. CUSTOMER-FRIENDLY
POLICIES LIKE “TRY BEFORE YOU BUY”
AND RIGHT TO RETURN ARE A REVOLUTION
IN RUSSIAN RETAILING, AS CO-FOUNDER
AND CEO NILSEN TOGZEN TOLD MARINA
MARSHENKULOVA.
prejudice of clients toward online shopping:
many simply didn’t understand why
and how to use an online store, they had
doubts about the quality of goods, etc. We
made the purchase conditions so transparent
and beneficial that gradually we managed
to overcome those fears.
Then we saw there was not enough
technology capacity for development:
the infrastructure of Russian market just
couldn’t cope with our requirements. So
we had to build our own: to open a delivery
service, to build a warehouse.
Are you going to expand the business
further?
It is one of the priorities. We started with
a regional expansion, aiming to cover the
entire Russian market, then we went outside
of Russia. In 2012, Lamoda started
working in Kazakhstan, becoming a leader
among online clothing and shoe stores,
then, in 2014, Ukraine. In the future,
Lamoda will continue its international
expansion and will be released in the new
markets of the CIS. We strive to ensure so
that in Russia and the CIS everyone knew
that for the fashion goods they should
turn to Lamoda, and get the most out of
shopping at our online store. For this it is
necessary to expand its geographic presence,
constantly improve the service level
and create new service benefits enabling
customers to make the process of buying
clothes and shoes as easy as possible.
How would you define the internal culture
of your organization?
Lamoda’s corporate culture is based on
the principles of mutual respect and teamwork
that requires demonstrations of personal
responsibility and initiative at all official
levels. Our company is committed to
actively contributing to their employees to
achieve their potential. Thanks to the team
spirit, the employees identify themselves
with the company and help to fulfill our
commitments to the customers because
they are interested in the success and prosperity
of the company.
How do you motivate your employees?
We have a motivation system in Lamoda
including remuneration, development of
the social package, guarantees and compensation,
assistance to the staff in addressing
social and domestic issues. We
encourage staff development and offer
trainings, free foreign language education,
mentoring system for new employees and,
of course, prospects for career advancement.
What is unique about the products and
services that Lamoda provides?
Lamoda offers the best level of service and
a wide selection of products — our range
includes more than 1,000 brands of clothing
and accessories. In addition, thanks to
the courier service Lamoda Express residents
of 45 Russian cities can receive their
order the next day after clearance and try
things on for free before buying.
Have you attracted investors for your
projects?
The project Lamoda was created with the
support of the world’s leading investor,
Rocket Internet. Over the past three years,
we have attracted several major investments,
including a record for the Russian
e-commerce market attachment in the
amount of $130 million from Access Industries,
Summit Partners and Tengelmann.
Other investors are Holtzbrinck Ventures,
Investment AB Kinnevik, JP Morgan Asset
Management and PPR Group.
What challenges did you face while leading
your business?
As the business develops, the problems
change. First, the main difficulty was the
STATISTICS
10 facts about Lamoda
It has 350,000 social network subscribers | The longest delivery of a customer’s order was 3,700 km | It takes 8.6 seconds on average
for the operator to respond | The longest conversation with a client lasted 1 hour and 40 minutes to order 48 items | The most expensive
order was worth 1,012,742 rubles which consisted of 319 items.
The founders of Lamoda are Niels Tonsen, Florian
Jansen, Dominik Picker and Burkhard Binder.
The fi rst order was made in March 2011.
Within three and a half years Lamoda employed more
than 2,500 people.
The collection of online store is updated daily and has
over 2 million items from more than 1,000 brands.
Slogan: “Fashion with delivery.”
It has attracted more than two million customers.
Free shipping all over Russia; refund within 365 days,
online consultation with stylists.
Still using print — for seasonal magazine
One of the company’s investors is a French holding company
PPR which owns Gucci, Yves Saint Laurent and Puma.
In June 2013 Lamoda received $130 million from Access
Industries, Summit Partners and Tengelmann — the
largest investment in Russian online commerce.
Source: LAMODA

RUSSIA — GERMANY | 13
LEGAL CHANGES OFFER
BUSINESS SAVINGS
CHANGES TO THE RUSSIAN CIVIL CODE COULD SAVE
COMPANIES MONEY, SAYS HELGE MASANNEK, DIRECTOR
TAXES & LEGAL, AT RUSSIA CONSULTING. BUT IMPENDING
TAX RISES COULD BOOST COSTS. HE SPOKE TO MARK GAY.
Helge Masannek | RUSSIA CONSULTING
On tax, is there a worry that Russia’s
days as a low tax country may be coming
to an end? What will the proposed increase
in sales tax mean for businesses?
We have seen a remarkable improvement
in the Russian tax system in recent years,
along with the tax administration and
court practice in tax cases. The governmental
tax policy guidelines for 2014 to
2016 state that the tax system shall further
be improved and contain a statement that
they will not introduce new taxes. Unfortunately
we have seen recently a tendency
to increase tax rates and to re-introduce
the sales tax. This will increase the administrative
burden on business and also
in terms of tax inspections.
There is a certain probability that
smaller businesses will try to evade sales
tax. Furthermore the increase or introduction
of new indirect taxes will lead to an
increase of the tax burden upon consumers
and thus will have an impact on consumer
demand, as consumers will have less money
to spend on goods and services.
Are there any positive changes? How do
recent amendments to the civil code affect
companies?
The new Civil Code makes it possible
to assign the general director functions
to a management company. This can
be very attractive to foreign investors
as the use of a management company
can mean a significant cost reduction.
Take the example of a small subsidiary of
a Western company that deals only with
the sales of goods or services. All business
decisions are taken within the parent
company, so it does not need to employ an
expensive general director on the Russian
market. In this case, the use of a management
company is more than justified.
Using an independent management
company also means improving the quality
of control of the Russian business. The
employees of the company can objectively
inform the parent company immediately
about anything important that affects the
subsidiary, even in English, German or
any other language.
Does this make German companies
less likely to acquire Russian subsidiaries
or to localize their operations
in Russia?
German companies are continuing with
their ongoing projects. So if the decision
to set up a subsidiary has been taken, such
decisions are normally not cancelled.
Also companies that have already decided
to localize production in Russia are continuing
with their projects. But we also
are seeing that if decisions have not been
taken yet, then plans are likely to be postponed
until the situation becomes clearer.
So the real problem is the uncertainty
about how the situation will develop in
the near future.

14 | RUSSIA — GERMANY
COACHING GERMAN STYLE —
OPPORTUNITIES SQUARED
Eleonora Sandulenko | FBK-COACHING
FOR MORE THAN 10 YEARS FBK-COACHING
HAS INTEGRATED THE BEST GERMAN
PRACTICES INTO RUSSIA’S BUSINESS
ENVIRONMENT. ELEONORA SANDULENKO,
GENERAL DIRECTOR, FBK-COACHING, SPOKE
TO MARINA MARSHENKULOVA.
Could you describe your company’s
business?
FBK-Coaching provides the services of
coaching, training and change management
mainly to German companies in
Russia. Ninety-five per cent of our customers
are German companies like Volkswagen,
Liebherr and others. The company
also publishes professional German
books in Russian for HR specialists, trainers,
coaches and senior managers.
Is there a difference between Russian
and German managers?
I’ll give you one example from my coaching
experience, which clearly illustrates
the difference in mentality. A German top
manager from a major company noticed
mistakes in a report by his Russian assistant
and asked her to correct them. Imagine
how surprised he was when he came
out of his office some time later to find
her crying in the corridor. When he asked,
“Why are you crying?” he got no answer
and was left absolutely confused.
What happened there? The woman
reacted with pain to his comments, thinking
he was trying to hurt or even fire her.
As a result, instead of a corrected report
we have a sobbing employee and a perplexed
manager. The level of relationships
outweighed the actual issue. To improve
communication and eliminate misunderstanding,
we use a model called “four
ears”, which was developed by the father
of communicative psychology, Professor
Schulz von Thun. Every message has four
levels: facts, self-revelation of the speaker,
the attitude and an appeal for further action.
Hence, the communication problem:
a German manager often communicates at
the level of facts and a Russian colleague
perceives all the information at the level of
relations.
Of course, this is just the tip of the
iceberg encrypted in the cultural codes of
Russia and Germany. Both sides can and
should be able to learn how to decrypt
it, both at the level of personal relations,
boss-to-subordinate, and at the level of
the organization, when changes are introduced.
We are convinced that the synergy
of two cultures, the neutral (German) and
emotional (Russian) as defined by Fons
Trompenaars, can improve business opportunities
for both sides.
Do you maintain relations with your
clients once the work is done?
Yes, continue to commnicate with them
in a free mode. But coaching is a self-help
method. As Germans say: ‘Hilfe zur selbsthilfe,’
or help for self-help. This is what
coaching is all about. A coach must prepare
clients to cope with problems themselves
and to be able to find a solution for
any situation.

RUSSIA — GERMANY | 15
UNIQUE VIEW OF MOSCOW’S
HISTORIC SKYLINE
AFTER FOUR YEARS IN BERLIN, OLIVER ELLER HAS
RETURNED TO MOSCOW AS GENERAL MANAGER OF THE
HOTEL BALTSCHUG KEMPINSKI AND KEMPINSKI AREA
DIRECTOR OF RUSSIA. BACK IN 2007 HE LAUNCHED
ANOTHER LUXURY HOTEL IN MOSCOW. HE TOLD MARK
GAY ABOUT HIS FEELINGS UPON HIS RETURN.
Oliver Eller: It’s wonderful to be back in
Moscow. I lived here for five years, made
many business partners and friends, and
married a Russian lady.
It truly has been a great opportunity
to have had the chance to open the Ritz-
Carlton on Tverskaya street several years
ago, with a view of the Kremlin from one
side, and now to be standing here on the
terrace of the Baltschug and look back in
the other direction onto St. Basil’s Cathedral
and Red Square. I think we have a
matchless view!
This was the first international luxury
hotel in the heart of Moscow. How does
transport accessibility influence the type
of guest today?
I TRULY FEEL THAT MOSCOW IS NOT JUST
THE BIGGEST EUROPEAN CAPITAL. IT IS
AN INTERNATIONAL CITY THAT IS FULL OF
OPPORTUNITIES AND FULL OF LIFE.
Every Muscovite is a potential guest for the
Baltschug. How you arrive does not matter,
whether you come to have a cup of coffee or
to book 10 rooms for 10 nights. You get the
same heartfelt, warm welcome.
Having said that the next metro station
is 10 minutes away on Pyatnitskaya
ulitsa, which has just been renovated and
it is a beautiful street. It is lively, there are
cafés, bars and restaurants and it is a street
where you want to walk. It’s nice, in a city
of so many millions of people, to have a
walking district nearby that is safe and attractive.
What can you do to lure the wealthy independent
travelers who are still quite rare
in Moscow?
Although the company is growing,
Kempinski never wants to manage more
hotels than the companies’ age and we were
founded in 1897. That’s because we believe
luxury is limited. If it is for everybody it is
no longer luxury.
Standing on the Library terrace at
the Baltschug Kempinski, the location
and the view is my unique selling point
as a weekend hideaway. We don’t sell
just food, beverages and beds; what we
sell is an experience. We want every guest
when he leaves to say, “wow, that was
different”. What makes a difference is
exquisite, personalized service. We have
ladies and gentlemen who have worked
here for 20 years. That says a lot about
the management of the company, about
knowing your clients and about fulfilling
guests’ wishes before they have been
announced. This goes back to what I said
about selling an experience. We invite
every Muscovite, every guest around the
world, to try the Hotel Baltschug.
How does each hotel capture the character
of a city while still being part of the
Kempinski Group?
We are not a chain in which each element
is equal. We are a group of individuals.
There are very successful chains of popular
restaurants that are the same everywhere.
We believe our guests like the individual
touch. When they visit Moscow they want
to feel Moscow. If I wake up at the Çırağan
Palace Kempinski I know I am in Istanbul.
If I wake up in the Emirates Palace, I
know I am in Abu Dhabi and at the Adlon
Kempinski I can only be in Berlin. We have
flagship properties all around the world that
give you a true sense of place.
But as a Swiss group, surely there is a
character?
I hold a German passport but that doesn’t
mean I’m just German. I’m a human being
who was born in Germany. I have lived
all around the globe. On the other hand,
many famous luxury brands — Gucci,
Hermes, Chanel, Dior, Ferrari, Lamborghini
and Porsche — are European. And
we believe that Kempinski is the oldest
STATISTICS
Oliver Eller | HOTEL BALTSCHUG
KEMPINSKI MOSCOW
luxury hotel company in Europe. That’s
what we stand for.
People must ask you about the timing of
your return to Moscow. Is it a good time?
Everyone asks that! I believe the
opportunities are great now, especially
in business. I also think that whomever
you meet now, whatever relationships
you build, they might prove to be more
sustainable.
I have lived every five years in a different
country and managed hotels around
the world. I truly feel that Moscow is not
just the biggest European capital. It is an
international city that is full of opportunities
and full of life. It’s a great place to do
business and it is a great weekend hideaway.
How will you measure success?
I personally will be measured not by what I
may have done 10 years ago. The only fair
measurement is to compare me and the
Baltschug Kempinski to the competitive set
in town.
If you take that into consideration, I
can promise you that the Baltschug is going
to more than compete because as they say,
with every great building you need a strong
foundation and we have that: we have the
oldest European hotel group, an unbelievable
location and tremendous staff.
Five Facts about the Hotel
Baltschug Kempinski Moscow
The Baltschug is the warmest spot in Moscow, according to
weather forecasters.
It was the site of the fi rst Moscow kabak (bar) during the reign of
Ivan the Terrible in the 16th century.
Russian artists A. Kuindzhi, I. Kramskoi and A. Vasnetsov
painted the views of the area more than 100 years ago.
The fi rst international 5-star luxury hotel in Russia — Hotel Baltschug
Kempinski Moscow – welcomed its fi rst guests in 1992.
The fi rst phase of renovation of rooms and suites at the hotel was
completed in 2013.

16 | RUSSIA — GERMANY
YOUNG MUSCOVITES WELCOME
YEAR OF GERMAN LANGUAGE
BY MARINA MARSHENKULOVA
A TWIST ON THE WORD, ZDRAVSTVUY,
GREETED VISITORS TO THE HERMITAGE
GARDEN FOR THE LAUNCH OF EVENTS TO
CELEBRATE TWO TONGUES, IN PRINT, STUDY
AND PLAY.
Germany and Russia will be celebrating
each other’s languages and literature this
year and next. The series of events is an extension
of the years of Germany in Russia
and of Russia in Germany, which began in
2012-2013.
Organized by the Ministry of Foreign
Affairs of Germany and the Goethe
Institut, the aim is to strengthen longterm
bonds in cultural and educational
spheres, and to promote the German
language within the Russian education
system, by showing its value in business
and the arts.
Starting young has a special advantage
in language learning and the program has
a strong focus on youth. As well as professional
development, the year of language
and literature will promote early language
learning, improving the training of teachers
of German, as well as the training of
writers, translators and publishers, especially
in the field of art, and children’s and
young adult’s literature.
The Year of German language and
literature opened on September 13-14
with a major festival “German, cubed”
which was held in Moscow’s Hermitage
garden. Children and adults had the opportunity
to dive into the colorful world
of the German language and literature
with the help of theatre and dance, performances
by |German bands and musicians,
and readings by German authors.
There were giant books, interactive art
ONLINE RESOURCES
FROM LANGUAGE
GAMES TO
AUDIOVISUAL
MATERIALS CAN
BE FOUND WITH
THE KEYWORD
DEUTSCH2014-2015.
Young and old enjoy
bilingual theatre
at the launch of
the Year of German
Language and
Literature. Right:
the word wall, a sort
of large Scrabble |
MARK GAY
objects, children’s lectures, and a poetry
slam and many other exciting events during
the festival.
Among the guests at the festival there
were rap-poet Bas Böttcher, the legendary
break-dancer Niels Robitzki, known
under the pseudonym Storm, and German
rapper, CRO. Younger guests of the
festival could get acquainted with the
German language in the game form during
the open classes, take part in theatrical,
artistic and scientific workshops and
competitions. They also had a unique opportunity
enter the world of German fairy
tales with the help of visiting German
animators.
As the year of literature and language
continues, there will be: a forum of Russian
teachers of German; a competition “The
best German teacher in Russia, 2014” in
seven categories; awards for the best German
language interpreter; and book fairs
for fiction and non-fiction literature.
In the first half of 2015, teachers of
German from Kaliningrad to Vladivostok
will be able to take part in traveling
educational forums. German authors will
hold readings in different cities, journalists,
translators and writers will have their
own events; students will compete in the
Second Russian National Olympiad in the
German language; the German-Russian
University in Kazan will open; and an international
youth environmental project
will highlight the advances of both countries
in this sphere.
Online resources include educational
materials, tips for learning German, biographies
of contemporary German authors,
recommendations for readers, excerpts
from fiction literature, interactive language
games, audio and video materials, and also
a large collection of links with other suggestions
from the organizers and partners
of the project.The official website of the
year of language and literature in Russia is
www.deutsch2014-2015.ru

RUSSIA — GERMANY | 17
CHEMICALS COMPANY AIMS TO BOOST
SELF SUFFICIENCY
FROM ANIMAL FEEDS TO FERTILIZERS, “GREEN” TIRES
TO SOUND INSULATION, EVONIK MAKES PRODUCTS THAT
HELP MAKE RUSSIA LESS RELIANT ON IMPORTS. JULIO
VRBANIC, GENERAL MANAGER, EVONIK CHIMIA, SPOKE
TO VLADISLAV SHAYMAN.
Can you summarize the range of chemicals
you produce and which ones to you
make in Russia?
Evonik is one of the world-leading
companies in the production of specialty
chemicals. Profit growth and a continuous
increase in capitalization are the main
strategies of the company. About 80 per
cent of our sales are in leading industry
markets, and we plan to develop these
markets in the future. We focus on
emerging markets, developing new areas
of activity through innovation and external
development, and continuously improving
our pricing and technological position.
The company strives to follow
emerging mega trends, namely: health
and nutrition, resource efficiency and
globalization of technologies. It develops
products so that they match customers’
and companies’ needs, a rather difficult
task, which is best addressed by joint
efforts. We are convinced that the presence
of customers and joint decision-making
are the keys to success.
Talking specifically about our business
in Russia, I would note the construction of
a plant for the production of Biolys which
is a feed additive. The new plant will use
the fermentation process developed by
Evonik that creates amino acids. We have
been recently been granted permission to
start building in Volgodonsk.
All of the above created important
prerequisites for the continuous
development of the project. But we are
also very active in other areas of the
industry: for example, in paintwork
materials, production of so-called “green
tires”, as well as in the production of road
markings, special building insulation
and noise insulation. Our Russian joint
venture produces, for example, materials
that are used for sound absorption and
sound insulation. These materials were
widely used in the construction of sports
facilities in Sochi. For the production
of lightweight structures, we develop
products and technologies that are used in
the automotive industry, and which will in
the long term be used in aircraft.
Can you say more about the new feed
plant in Volgodonsk?
Evonik has recently been granted
permission to build the plant. It will
strengthen the position of Evonik in the
Russian market and will contribute to
the effective and long-term production of
pork and poultry in Russia. The plant is to
be commissioned in 2016 with a capacity
of about 100,000 tons per year. It will use
a new fermentation technology developed
by Evonik, which produces Biolys, an
effective source of lysine for animal feed.
Russia is an important market for
us. We see a steady increase in demand
for amino acids for animal feed. With
the construction of the factory we can
become independent of imported meats.
As a raw material we will use wheat grown
in the Rostov region, which the joint
venture will process. For us, it has several
advantages. Firstly, we integrate in the
opposite direction, and secondly, we enter
deeper into the chain of building value.
Which areas of agriculture do your
chemicals support?
World population growth poses
the challenge of increasing agricultural
food production through better use of
existing acreage. Plants are the starting
materials for food, and also have a use
in energy production. One of the ways
to increase the productivity of cultivated
areas is the introduction of highly
effective plant protection products.
Whether for cereals, fruit or grapes: plant
protection is an integral part of longterm
cultivation. Evonik’s product range
includes innovative solutions for the
agricultural industry. So it will further
develop formulations for plant protection
products and their optimization for
long-term increase of productivity in
agriculture. The efficiency of fertilizer or
crop protection chemicals is significantly
increased by the use of silicic acid. The
new formulation reduces the number of
active substances used while maintaining
efficiency.
Evonik also offers granular soil that
accumulates water supplies and provides a
uniform supply of soil water and nutrients
in dry land areas, thereby making it
possible to cultivate plants in areas where
there is often drought.
Biogas is produced from renewable
raw materials, sludge treatment plants,
liquid manure or agricultural waste as a
result of microbial fermentation. First,
the crude biogas consists of more than
one-third carbon dioxide and other gases
WE LISTEN TO OUR CUSTOMERS AND WE
INVESTIGATE THE GROWTH OF MARKETS
IN EASTERN EUROPE. NEEDS THAT HAVE ARISEN
IN RUSSIA IN RECENT YEARS FIT WITH OUR
CORE ACTIVITIES.
in small quantities. These impurities must
be separated from the methane. Plastic
membranes made by Evonik allow the
separation of CO2 with maximum selectivity
and thereby constitute a highly efficient
technology for the production of
biogas.
You expect Russia to become an even
more important market. Can you put that
in perspective compared with others?
In 2011, the launch of the project “Development
Strategy for Eastern Europe”,
contributed to the advance of the region as
a whole. It increased not only the growth
of our core markets, but also opened up
potential new markets.
The fact that Evonik pays special attention
to this region’s development plays
an important role in the development of
Julio Vrbanic | EVONIK
the project. Russia with all its size and
dynamics of its markets is a generator for
the development of this project. Although
Evonik has been an active and successful
business in Eastern Europe for a long
time, the form of this activity is not perfect.
The aim of our project is to improve
it. I firmly believe that with the help of
this project, we will implement our most
ambitious goals. At the same time, Russia
will surely play the role of locomotive in
achieving these goals in Eastern Europe.
What are the advantages to Evonik of localizing
production in Russia? How many
plants do you have, or plan?
We have developed a general investment
program up to 2020 totaling six billion
euros, of which two thousand have already
been invested. Also, we continuously
research and develop new markets and
new projects. We listen to our customers
and we investigate the growth of markets
in Eastern Europe. Needs that have arisen
in Russia in recent years fit with our
core activities, namely: mobility, oil and
natural gas, as well as agriculture.
Evonik also runs the online science
education program, Cyber Classroom,
for children around the world, as a kind
of a charitable effort to encourage the
teaching of science. Will this be available
to Russian students?
It really is an option that we are considering
at the moment. Russian schools and
universities offer very high standards and
Russian graduates are interested in our
company. So why not support the development
of potential employees from the
very beginning?

18 | RUSSIA — GERMANY
FROM METAL TO MODERN: BANDS FIND
COMMON CHORD
BY VLADIMIR KOZLOV
GERMAN MUSIC HAS PROVED A SUCCESSFUL
EXPORT, LARGELY IN THE POP AND ROCK
SEGMENT. NOW RUSSIAN PERFORMERS ARE
BEGINNING TO REPAY THE COMPLIMENT.
Throughout most of the 1970s and 1980s,
Germany was a gateway through which
contemporary rock and pop music came
to the Soviet Union. Two decades later,
Rammstein’s huge popularity in Russia
came as another proof of the two countries’
special relationship in the domain of pop
and rock music.
Musical connections between Russia
and Germany, however, go back much further
than the 1970s.
A few years ago, Oleg Nesterov, the
front man of the Moscow-based band
Megapolis, launched a side project, Berlin
Postmen’s Orchestra. Featuring violin,
accordion, bass, guitar and drums, the
orchestra has been performing 1920s and
1930s German songs, with lyrics translated
into Russian.
“When I was translating German pre-
WWII songs into Russian, I was struck by
the melodic similarity [between them and
Russian songs of the time],” says Nesterov.
A real conquest of Soviet audiences by
German pop acts began in the 1970s when
the likes of Boney M. and Dschinghis Khan
made it through the Iron Curtain.
“By the 1970s, West Germany had
regained its economic power to become
Europe’s strongest economy,” says Yevgeny
Safronov, general director of the music
news agency InterMedia. “Accordingly, a
very powerful music industry formed in
the country. Unlike, for instance, France,
which deliberately protected its market
and language from expansion of Englishlanguage
culture, the majority of Germany’s
music industry was export-oriented
and was therefore English-speaking.”
Boney M. hits featuring Caribbean
and Jamaica-born singers were so popular
in the Soviet Union that the band,
which has gone through numerous lineup
changes and several rifts during a career of
almost four decades, still remains sought
after for new year corporate parties in Russia.
One of the band’s singers, Bobby Farrell,
died in St. Petersburg of a heart attack
in late 2010 while doing a series of New-
Year gigs with Boney M.
Another band that originated from
Germany, Dschinghis Khan, owes its popularity
to the 1979 song “Moscow” and to
Soviet censors who banned the innocuous
song themed on the upcoming 1980 Moscow
Olympics for no apparent reason.
Soviet television intended to air a
video of the song as part of the new year
THEY DIDN’T TRY TO FOLLOW BRITISH POP
STANDARDS BUT PRODUCED PRIMITIVE
MELODIES AND ARRANGEMENTS THAT WERE
EASILY ADOPTED.
show on the night of January 1, 1980.
But Communist censors apparently got
scared at the very last moment and only
a 15-second clip of the song was actually
aired.
In the second half of the 1980s, a new
wave of German disco acts, such as Modern
Talking, Blue System and C.C. Catch
conquered the Soviet Union’s dance floors.
“Modern Talking’s huge popularity
in the Soviet Union and Russia is explained
by the fact that they didn’t try to
follow British pop standards but produced
very primitive melodies and arrangements,
which were easily adopted by local groups
copying those aesthetic approaches,” adds
music expert Alexei Mazhayev.
Incidentally, the most popular Russian
pop acts of the late 1980s, Mirazh
and Laskovy Mai, were, to a large extent,
copying Modern Talking.
Throughout the 1980s, Western music
often came to the Soviet Union through
East Germany, which, as a member of the
Socialist Bloc, had close ties with the USSR.
The East German record label Amiga
put out licensed records by Western rock
acts, which were legitimately available at
Soviet music stores and were in high demand.
At the same time, East German
Thomas Anders of the 1980s duo Modern Talking, singing in Cologne
in 2007 | ELKE WETZIG
rock bands, including Puhdys, Karat
and Stern-Combo Meissen, which often
toured the Soviet Union were, to some
extent, a substitution for Western acts that
almost never made it through the Iron
Curtain.
New music trends and styles often
came to the Soviet Union through Germany
rather than directly from the United States
or England, where they originated. That
was the case with heavy metal as Germany-based
Accept and Scorpions were more
popular here than any British or U.S. bands.
Scorpions were among the first major
Western acts to tour the USSR as soon as
Mikhail Gorbachev’s Perestroika reforms
led to the removal of the Iron Curtain and
the USSR’s gradual opening to the outside
world in the late 1980s.
In early 1991, Scorpions released
the Perestroika-themed single “Wind of
Change,” which sold millions of copies as
the world rediscovered Russian themes.
A decade later, a new music phenomenon
from Germany arrived in Russia, the
industrial metal band Rammstein, which
became hugely popular here.
“Rammstein turn their shows into
clownery, featuring swearing, marches, elements
of the industrial and soundtracks to
porno films,” says Mazhayev. “However,
nowhere in the world is Rammstein treated
as seriously as in Russia. For Germany and
Europe in general, this is a parody of everything
German, a very exaggerated parody.
Plus, the adjective “Teutonic,” used in just
about every article on Rammstein, sounds
cool in Russian.”
Oleg Nesterov and his Berlin Postmen’s Orchestra perform German
music of the 1920s and ‘30s, on violin, accordion, acoustic bass,
acoustic guitar and percussion. | LARISSA TIMOFEEV