The Berlin-Moscow Economic Axis (III)

MOSCOW/BERLIN | | russische-foederation

MOSCOW/BERLIN (Own report) - Berlin and Moscow are broadening their cooperation to the field of security technology with plans for the Russian Sistema company to join the German Infineon AG. Sistema is due to acquire approx. 30 percent of Infineon shares and thereby have access to basic technology, as well as military relevant encryption systems. Though there is opposition within Infineon, because cooperation with Moscow in the field of security would weaken possibilities for sales to the West, the company is still denying that "talks" to this effect have ever taken place. Yet according to reports, the German chancellery has given the green light for this project, because Moscow's demand to acquire German hi-tech can no longer be ignored in the elaboration of their bilateral cooperation. Reciprocity is expected. For example, last week Siemens was granted several contracts in the billions. The intensifying German-Russian business cooperation is publicly being promoted as a "modernization partnership" and expanded further via the EU. The objective is to reduce Germany's dependence on North American and Eurozone markets. Among the consequences is the weakening of Germany's bonds to the EU's single currency.

Green Light

According to press reports, the German Chancellery has given a green light in principle for the Russian Sistema Co. to join Infineon AG. Sistema (Moscow) is a conglomerate that deals in telecommunications and information technology, among other things. Last year it had a business volume of around US $18.8 billion and is considered in the business press to be "Russia's sole asset in the hi-tech branch."[1] Joining Infineon, Sistema would not only benefit from German basic technology, but also from special systems. Sistema, it is said, hopes that Infineon will be advantageous in commercializing the Russian military's Glonass Systems to be developed as a rival to GPS and Galileo.[2] Sistema has been planning to join Infineon ever since its attempted union with the German Telekom failed years ago. At that time, serious misgivings in questions of security were decisive for the German refusal, because Telekom produces, among other things, data networks and wiretap-proof means of communication. In the meantime, it seems that security misgivings have subsided. Jens Weidmann, the chancellor's most influential economic advisor, is said to be engaged in the exploratory talks with Infineon.

Dual Use

The question of relevant security technology is also the case with Infineon.[3] Infineon produces not only passports and encryption systems for the German government. Its technology can also basically be used militarily. The Sistema subsidiary, RTI Systems, on the other hand, supplies the Russian Defense Ministry. Its production includes radar stations for the military and electronic systems for Russian combat helicopters. One of the company's customers is the secret service. This is why there is considerable opposition at Infineon to Sistema entering the enterprise. In view of the relations between Sistema and the Russian military, the Russian company's participation would "limit every possibility of westward expansion" it is being said in company circles.[4] But in Berlin, one hears that Moscow is exerting pressure and can no longer be ignored. Already the setback in the planned union with Opel enraged Moscow's establishment.[5] The Russian side must be successful this time.

Advance Concessions

As a matter of fact, Russia has already made several advance concessions to Berlin. German energy companies, above all Eon, hold exclusive positions in the Russian natural gas sector.[6] German-Russian business had boomed up to the beginning of the worldwide economic crisis and is again on the upswing. Russian importers are still buying a great deal from German suppliers, even though in Moscow's import statistics since 2009, China is in first place, slightly ahead of Germany.[7] Most recently Siemens obtained a whole series of major contracts. At the end of the year, Siemens, in collaboration with a Russian partner, will begin furnishing 221 locomotives to the Russian state railroad, RZD, at a cost of 1.1 billion Euros. Siemens will supply the Russian MRSK utilities company with conduit technology for electricity. Siemens will also participate in the construction of the infrastructure for the liquefaction of gas, currently being developed in the Arctic Ocean and on Sakhalin.[8] Supplementary contracts are not to be excluded.

Modernization Partnerships

The German Russian economic partnership that, for several years, has been expanded to relevant military fields [9], is being publicly promoted as a mutually beneficial “modernization partnership”: Having lost its international standing with the collapse of the Soviet Union, Russian technology is to be brought up to date - with the help of German businesses. In October 2008, Berlin and Moscow officially initiated a “modernizing partnership” and extended it step by step to the entire EU. Paris followed suit with a French-Russian "modernization partnership" program in November 2009. At the beginning of June 2010, Brussels and Moscow reached an agreement for a similar program. These are creating also rivalries. With an eye on the sale of French-made helicopter carriers to the Russian armed forces "France and Russia are strategic partners in the field of military technical cooperation,"[10] the French Minister of Defense declared. Moscow prefers to buy armor for its combat vehicles from a German company.

Unrivaled

But, all in all, the advantages of the "modernization partnership" are clearly distributed in the West. German energy companies have, by far, the strongest position of foreign enterprises in the Russian natural gas sector - with exclusive access to the world’s largest gas reserves. And German producers are particularly profiting from the Russian market. In spite of the economic crisis, Germany was Russia’s most important western business partner. With a supply volume of US $21.2 billion, Germany was unrivaled by France (US $8.4 billion) and Italy (US $7.9 billion) and even the US (US $9.2 billion).

Shifting the Weight

These facts appear purely economic, but they are, in reality, of great political significance. The weight of German business relations is slowly but surely shifting away from North America and the Eurozone toward Russia and Asia. This weakens not only cohesion of the transatlantic alliance - beyond its military component. It also reduces the significance of exports within the Eurozone and therefore, in the long run, the significance of the Euro, which had particularly facilitated German exports to countries within the Eurozone. German withdrawal from the Euro, which was recently in discussion, (german-foreign-policy.com reported [11]) now acquires more rationality.

[1] Alte Bekannte Sistema; www.ftd.de 28.06.2010
[2] see also Europa bleibt zurück
[3], [4] Russen buhlen bei Merkel um Infineon; www.ftd.de 28.06.2010
[5] see also Die Wirtschaftsachse Berlin-Moskau (I) and The Berlin-Moscow Economic Axis (II)
[6] see also Eurasien and Erdgaskooperation
[7] see also A Question of Orientation
[8] Milliardenaufträge: Siemens erobert Russland; Handelsblatt 21.06.2010
[9] see also Unheilvoller Schatten and Nuclear Alliance
[10] Frankreich sieht Russland als strategischen Partner bei militärtechnischer Kooperation; RIA Novosti 14.06.2010
[11] see also Thinking the Unthinkable