European Businesses in Russia: A Balancing Act
European Enterprises Cite Ongoing Reasons for Maintaining Operations in Russia
In the face of persistent challenges, European companies have managed to strike a delicate balance in Russia's market. According to AEB research, a staggering 67% of businesses, compared to 66% in 2024, maintain their operations in the country. The AEB's business climate index, standing at 127 points as in 2024, showcases this relative equilibrium.
This newfound equilibrium comes after a phase of active recovery, with businesses adapting their operational models, crafting alternative supply chains, and learning to navigate under persistent constraints, according to AEB General Director Tadzio Schilling.
The factors underpinning this resilience include qualified personnel, advantageous raw material prices, state subsidies, low wages, reduced competition, and attractive export conditions.
However, hopes for immediate Russian economic growth are waning. Only 50% of companies predict growth in the next 1-2 years, a drop from 64% in the preceding year. On the other hand, medium-term and long-term outlooks have seen some improvement, with 65% and 82% expecting growth over the next 2-5 and 6-10 years respectively.
Despite this cautious optimism, obstacles loom large for European businesses in Russia. US and EU sanctions, Russia's countermeasures, and geopolitical uncertainty stand out as the principal challenges. Fully 87% of companies have been affected by these sanctions, with the impact being most pronounced on banking, exports and imports, currency reserves, and SWIFT systems.
The AEB, an association uniting over 380 European companies, conducts annual research since 2011. In the most recent survey, top managers of 100 companies participated, hailing from Russia, Germany, Switzerland, the USA, France, the Netherlands, the UK, Italy, and other countries.
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European businesses in Russia have managed to maintain their operations, even increasing their presence as shown by the AEB's research, with 67% of businesses still active in the country as of 2024. This resilience can be attributed to factors such as qualified personnel, advantageous raw material prices, state subsidies, low wages, reduced competition, and attractive export conditions in the industry. However, the future of business remains uncertain due to ongoing challenges like US and EU sanctions, Russia's countermeasures, and geopolitical uncertainty, with 87% of companies reporting an impact on their banking, exports and imports, currency reserves, and SWIFT systems.
