Opel Sale May Deepen Russian Ties to Germany, Trump East Europe
By Leon Mangasarian
May 30 (Bloomberg) -- German Chancellor Angela Merkel's blessing of a Russian-backed bid for General Motors Corp.'s Opel unit augurs deeper ties between Moscow and Berlin that may trump concerns of ex-Soviet nations squeezed between the two capitals.
Merkel's government earlier today picked a partnership led by Magna International Inc., a Canadian auto-parts supplier, with Russia's biggest bank, OAO Sberbank, and Russian carmaker OAO GAZ as the buyer for Opel, the European division of GM, which will file for bankruptcy next week.
"This will fuel suspicion in east Europe over Germany and Russia and why the biggest economy in Europe has tied up with strange Russian tycoons to please the Kremlin," said Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy. "Germany is playing off the Poles and the Baltic states against Russia."
Germany is Russia's biggest trade partner, a relationship underpinned by rising German gas and oil imports. Annual German trade with Russia increased five-fold to 68.2 billion euros ($96.2 billion) last year since 2000. With 6,000 German companies operating in Russia, business leaders in Berlin view the global recession as a speed-bump, with manufacturers set to win contracts as Russia diversifies from energy and rebuilds transport and health care.
"Economic ties between Germany and Russia are very important," Merkel said at a joint news conference with Russian President Dmitry Medvedev in Berlin on March 31. "There's a lot of potential here."
Under Magna's initial proposal, the Canadian company would get a 20 percent stake in GM's Opel and Vauxhall divisions in Europe. Sberbank would own 35 percent, matching the remaining holding of Detroit-based GM. Magna Co-Chief Executive Officer Siegfried Wolf has described GAZ, based in Nizhny Novgorod, Russia, as its industrial partner.
Merkel-Putin Talks
Underscoring the political and commercial mix, Merkel spoke by phone to Russian Prime Minister Vladimir Putin on May 26 about "trade and economic cooperation." That followed a May 23 conversation dedicated to Opel, said her spokesman, Ulrich Wilhelm.
Merkel's predecessor, Gerhard Schroeder, was hired by Russian state gas export monopoly Gazprom OAO months after leaving office in 2005 to head the construction of the Nord Stream pipeline that will provide Russian gas to Germany.
The Polish government fears that Nord Stream -- which will run from Russia directly to Germany under the Baltic Sea -- might allow Russia to cut gas supplies to east Europe while still supplying Germany and western Europe.
"Nothing's ever purely economic with the Russians, there's always political interest involved," Karol Karski, of Poland's opposition Law & Justice party and a member of parliament's foreign affairs committee, said in an interview.
Weight of History
German relations with eastern Europe are still burdened by the memory of Nazi crimes from World War II, while Russia's relations with the region are blighted by the post-1945 communist takeover by the Soviet Union.
"These countries are allergic to many things coming from Russia or Germany," Jan Techau, a European and security expert at the Berlin-based German Council on Foreign Relations, said in an interview. "Balancing Germany's ties with Russia and eastern Europe is one of the most difficult German foreign policy questions."
Techau said Opel is part of a bigger picture given that Russia views Germany as a key to its global economic policy.
"Russia wants to move massively into Western markets," he said. "Opel would be a real catch because they'd get a big technological advantage for their auto industry and a foot into one of the world's biggest economies."
Russian Market
The move makes sense for Opel because Russia is set to become Europe's largest car market, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.
Russia is almost as crucial for German exports as China, and Merkel -- who grew up in communist East Germany -- has sometimes adopted policies linked to Russia that are opposed by eastern Europeans. These range from Nord Stream to her rejection of fast-tracking former Soviet republics Ukraine and Georgia for NATO membership.
For Germany, closer ties to Russia may also mark a bid to ensure a pivotal diplomatic role as the world's center of gravity shifts away from Europe and President Barack Obama focuses on the Middle East and Asia, says Techau.
"U.S.-Russian relations play out at a different level including security, the soft underbelly of Russia in Central Asia and North Korea," he said. "These are areas where Europe is a small player and it's the Europeans who should be concerned that the new Obama policy will squeeze them out of their old mediator role between Moscow and Washington."
To contact the reporter on this story: Leon Mangasarian in Berlin atlmangasarian@bloomberg.net
Last Updated: May 30, 2009 03:15 EDT
