New Tigers in Central Asia and the South Caucasus
Expert Ulf Schneider, who has been active in Eastern trade for many years, on current developments and prospects for German companies.
Mr Schneider, how is the situation of your company since we met at HANNOVER MESSE?
It is an extremely difficult situation, a real tragedy. My thoughts are with the families of my colleagues every day and with all the people who are suffering in Ukraine. Our office in Kiev continues to function, we have very good dedicated staff who are all well, thank God. We have not lost a single customer in Kiev. The whole development hits me mentally very hard. We have reached a point where you need a lot of creativity, perseverance and strong nerves to get through this time.
The nerve strength – what did that look like with your clients, the German companies?
Often there are no simple answers because circumstances can sometimes change every month, every week or every day as well. At first, people in the companies held their breath, they didn’t really know what was happening. On the morning of 24 February 2022, when my colleague from Kiev wrote to me, I too did not yet want to believe what had happened. Many companies I know in Russia were initially of the opinion that they should not give up their business in the spirit of understanding and the business contacts they had built up. But then they changed their minds — in many cases simply because of public pressure. This changed a little in the summer of 2022 when this pressure eased somewhat. Decisions were then made more often again that were entrepreneurial and business-related. One should not be deceived: the majority of German companies have remained in Russia. Often with less commitment, which is sometimes due to the sanctions and partly to the logistical restrictions, which have since returned to normal. The sanctions legislation and the upcoming packages will continue to significantly restrict entrepreneurial activity in Russia.
Is the sale of assets in Russia a prospect? Are there any buyers at all?
For a certain time, the management buy-out was the preferred option. A well-known case is Kühne + Nagel, which was sold to the German general director in Russia and subsequently renamed the company. There are also several examples of companies that have sold to institutional investors. They are very interested in taking over Western companies including the technology behind them for Russia. There are indeed many difficult legal questions here, but also technical ones. A naturally very difficult decision for any shareholder in the West is the market value that can be expected. A large technology group, for example, terminated the contract and transferred the know-how on a large scale to a Russian state-owned company. Overall, I wonder if it makes sense to transfer the know-how just to be able to leave the market. By the way, the companies that stay in Russia and try to continue their business find a relatively good climate with the state authorities, as long as they feel the will that you want to do business in the country as a foreigner.
Central Asia and South Caucasus can continue what began thirty years ago with the Asian tiger states
What role does Central Asia play for the SCHNEIDER GROUP and for your customers?
I meet many German managers in Kazakhstan and Uzbekistan whom I have seen in Moscow in the past. At the same time, I see that Central Asia is growing together with the South Caucasus, i.e. Azerbaijan, Georgia, Armenia, to form a Trans-Caspian region. These countries can continue what began thirty years ago with the Asian tiger states. I believe that the Eurasian Tigers in Central Asia and the South Caucasus can be such a success story! The entire region is home to over 70 million people, and the strongly emerging countries are very well suited for production development, especially Uzbekistan, but also Kazakhstan. A region that can be a point of geostrategic friction, but which on the other hand maintains good relations in all directions, in the sense of “multi-vector foreign policy”. With China — via the development of the new side road towards Europe, with Russia as still one of the largest trading partners. But the European Union and the USA are also expanding their economic relations with these countries. These Trans-Caspian countries will have to push certain reforms of their economic and especially financial systems and also continue to work on legal security in order to succeed as Eurasian tiger states.
So despite the very difficult situation, you are cautiously optimistic and above all enterprising?
As an entrepreneur, I have to react to all the developments with my decisions. I founded my company in Moscow exactly 20 years ago. We then went to Saint Petersburg and Kiev. Then, step by step, the branches in practically all the surrounding countries were added. I am very happy about that today. I have now opened four more offices in the last few months, and we will continue to grow in order to be represented throughout Central Asia and the South Caucasus. There will also be more offices in the Baltic States. And I also believe that the Western Balkans will be a new, interesting region. These are all regions and countries where we as SCHNEIDER GROUP will set new accents.