Introduction. understand how the relations between these countries have

Introduction.

       
Relations between Germany and Russia, connected with each other by a
common 1000-year history have always been difficult. Economic relations and the
development of relations between Germany and Russia is one of the most
discussed topics today.

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The topic of this term paper is relevant because Germany is a large and
influential state, which is why the policy of this country affects not only
most European countries but also more distant countries such as China, the US
and Russia. It is also important to understand, what kind of economic relations
these two countries have today, the perspectives and dynamics of the
relationship between Russia and Germany, and what impact sanctions have had.

        If we look at history, we will see that
diplomatic relations between the FRG and the USSR were established on September
13, 1955. By 2012, the Russian-German association reached its highest level of
development. The ties between the two countries entered the stage of building
the Partnership for Modernization. The sales figures between the countries
reached a record value of 80 billion Euros.1

       
Anti-Russian sanctions imposed in violation of international law have
affected negatively trade and economic relations between Germany and Russia. It
is important to understand and understand how the relations between these
countries have changed, what influenced the changes in economic relations and
what prospects for the development of relations they expect.

 

       
The Federal Republic of Germany is located in the heart of Europe. This
is a democratic country open to the whole world. Germany is one of the
countries with the strongest economy in the world and represents a huge
innovative scientific landscape. At the same time, this country has a very
lively cultural life. Germany is not only the largest country in the territory
of 357021 km, but also the largest country in Europe, 82 million.2

       
Germany is a member of the EU, NATO, and is also among the G8 countries.
Contrary to the fact that Germany was the aggressor in several world wars,
Germany’s current policy has changed to such an extent that now this country
demonstrates a peaceful, intensively developing democratic state. The key areas
of German foreign policy are the further development of the EU, NATO, the
prevention of conflicts within these organizations, as well as security.
Germany is also aimed at implementing partnership relations with the countries
of the Mediterranean, the Middle East, and the CIS. In addition, the country
cares about respect for and strengthening of human rights, the provision of
sustainable balance throughout the world, the prevention of global disasters
and armed conflicts. Relations between Germany and Russia are of key value to
both sides, Russia’s international trade is dependent on the EU, since it is
much less diverse. Trade in goods with the EU historically accounts for more
than 50% of Russian trade with the whole world, while EU trade with Russia does
not exceed 10-12% of its world trade. Russia’s trade turnover with China rarely
reaches 20% of the trade turnover with the EU, and this cannot be explained
only by low transportation costs and / or by the best quality of European
goods. 3

       
Trade relations between Russia and Germany are
developing under the influence of the most important circumstances: confidence
in business relations, reliability of the contractual and legal framework,
geographical proximity, interdependence of the economies of both states.
Today, Germany is Russia’s second most
important trading partner. Its share is large enough. The main export item is
fuel and energy products, which Russia supplies to Germany in large quantities.
Germany, in turn, exports goods that are no less significant for the Russian
economy – cars, modern equipment, vehicles, food products, medicines and other
finished products.

The imposed sanctions affected the economic
development of Russia and the opportunities for growth in foreign trade. As a result,
the volume of trade between Russia and Germany began to decline.

In the picture above we can see the mutual
dependence of the economies of Germany and Russia in 2013.

Analyzing trade
relations between Germany and Russia for centuries, it is worth noting that the
structure of trade turnover between Russia and Germany does not change. A large
share in Russia’s trade with Germany is taken by the raw materials industry, and
Germany – the machine building industry. These types of products have become
traditional for the export of countries. Indeed, Russia’s specialization
industry has been formed long ago, as Russia has natural advantages, namely
unique natural resources, the production of which is accompanied by low costs. Germany,
without oil and gas, is forced to specialize in capital-intensive industries.
Thus, for a long time in Germany, the machine building industry has developed,
which has become the acquired advantage of Germany, thanks to the development
of technology, the upgrading of the skills of workers and the improvement of
the organization of production. As a result, Germany has low production costs,
compared to Russia and a high level of product competitiveness.

        The share of the Russian Federation in
Germany’s foreign trade relations has always been less than Germany’s share in
the Russian economy. However, despite the low share of the Russian Federation,
natural gas supplies cover more than a third of Germany’s needs, oil – 30%,
non-ferrous metals – 10%.4

The rapid development
of economic, investment, trade relations after the financial crisis between
Russia and Germany was interrupted for political reasons in March 20145 in connection with the accession of the Crimea to Russia and the events
in the eastern regions of Ukraine. Trade and economic sanctions against the
Russian economy and some large enterprises were introduced, on behalf of the
European Union. At the same time, part of the sanctions were imposed by the
authorities of Germany, Russia’s main partner for many years. The main goal of
imposing limited measures on the part of a number of major world countries was
the desire to isolate Russia and reduce its importance on the world stage. It
should be noted that for the current level of development of international
relations, the measures taken are contrary to the principles of the functioning
of the World Trade Organization, the main provisions of the Charter of the
United Nations, as well as the governing requirements of a number of
associations of different countries, for example – the European Union, the
Organization for Economic Cooperation and Development. Unfortunately, the world
economy is still heavily dependent on politics. Sanctions had a significant
impact on foreign trade relations between Russia and Germany. Germany, being
the main trading partner of Russia from the countries of the European Union
“ceased export of defense (March 21, 2014) and military (April 24, 2014)
products»6

        In response, the Government of the
Russian Federation imposed a ban on the import of agricultural products, raw
materials and food products originating in the countries of the European Union,
Norway, the United States, Canada and Australia.

        Germany, respectively, also affected
Russia’s response measures. Germany’s export of commodity groups, which fell
under sanctions, in the end of 2014 fell by 2 times compared with the beginning
of 2014. 7
Financial
losses in Germany amounted to 600-800 million euros in lost export revenue.8
But
in general, the Russian embargo did not have a serious impact on the German
economy as a whole, since the goods of machine building and chemical industry
make up the bulk of German exports.

The
structure of trade.

The structure of trade turnover was
not affected by the imposed sanctions. The main share of indicators in the
commodity structure between Russia and Germany was formed by five sectors: oil
and gas, engineering, automotive, electronic, and chemical. Despite the fact
that these industries were the most important in the turnover of 2014-2015, but
still made a negative contribution to the dynamics of bilateral trade. Their
indicators have experienced a drop below the average. The
share of the oil and gas industry is much higher than all other industries.
Russian goods were in demand in the German market because of prices that were
lower than global prices. Despite the fact that in 2015 the value of trade
decreased due to the depreciation of the ruble, physical volumes of trade
increased.

A serious drop in
exports from Germany to Russia was observed in 2015. Thus, the export of
engineering products fell by more than 40%. If in 2014 Russia was the fourth
market for machine builders in Germany, today it turned out to be the tenth.
Although even before the introduction of sanctions, there has been a tendency
to reduce the volume of exports to Russia of machine-building products. In
2013, it fell by 4.6%, and in 2014 – 15.8%. 9

Political reasons
hinder mutual cooperation and worsen the indicators of mutual trade. Foreign
trade turnover decreased by 34.7% by 2016, however, trade and economic
relations between Russia and Germany continue to exist. The fuel and raw
materials orientation of Russian exports is still preserved, and most of the
import from Germany is occupied by machinery. Sanctions restrict free trade
between countries, and this contradicts the principle of comparative advantage,
which proves the mutual benefit of trade relations.

 

Conclusion.

For centuries, Russia has sought to maintain
close economic ties with Germany, not only importing the goods needed for
itself, but also receiving knowledge and technology. The advantages of foreign
trade are proved by the theory of comparative advantages. Proceeding from the
theory, Russia and Germany specialize in those products in the production of
which have comparative advantages.

Germany is Russia’s main trading partner. This
is due to geographical, technological factors, historical cooperation and
successful interaction at the corporate level. Year after year, trade relations
demonstrated stable growth, despite the uniformity of exports and imports. For
Russia, Germany is important as a supplier of equipment, technology, light and
food products. This is due to the inadequate development of these industries in
Russia. In turn, for Germany, Russia becomes the main source of raw materials
and energy.

Since Russia and Germany are interested in
continuing cooperation, have a reliable legal basis, huge experience of interaction
and their economies are complementary, one can safely assume that the project
of building a common economic space will be beneficial for both sides.

1 http://www.russia-direct.org/opinion/why-troubled-relationship-russia-makes-germany

2 https://www.research-in-germany.org/en/discover-germany/general-facts.html

3 http://carnegie.ru/commentary/63664

4 http://archive.kremlin.ru/text/docs/2005/04/86576.shtml

 

5 http://ria.ru/spravka/20150317/1052843831.html

 

6 Tsvetkov
N.N. Russian-German trade and economic relations at the present stage in the
context of sanctions

7 Tsvetkov
N.N. Russian-German trade and economic relations at the present stage in the
context of sanctions.

8 http://www.dw.com/ru/

9 http://comtrade.un.org/labs/BIS-trade-in-goods/?reporter=276=643=2014=2