Business as usual for most German companies in Russia

If you speak English to an assistant in one of Berlin's luxury shops, you will often be met with incomprehension or, at best, a few fractured phrases. But if you try Russian, staff will come rushing out of every corner with a fluent response to every question.

Wealthy Russian customers have become such an important client group for Berlin's boutiques, jewellers and luxury car dealers that almost all employ Russian-speaking staff. In the lean years that followed German unification, the Russians were a welcome novelty, buying only the best and always paying in cash.

According to Mr Matthias Walther, a spokesman for MercedesBenz, Russian customers have paid up to 220,000 deutschmarks in cash for top-of-the-range models. Despite the current economic and political crisis in Moscow, Mercedes-Benz has not yet seen an appreciable drop in business.

"But it's obvious that if they have less money, there will be fewer Russian buyers. The Russians are extremely interesting customers for Mercedes in Berlin. The volume and quality of their business is anything but negligible," he said.

For the 500 employees at AS Creation, a wallpaper factory in the industrial town of Gummersbach, the Russian crisis has already had a direct impact. One-fifth of the factory's output for this year was destined for the Russian market but, according to board member Mr Joern Kaemper, the devaluation of the rouble means a drastic scalingdown of production.

"There is no overtime here from now on," he said.

Germany is Russia's biggest trading partner and German banks have most to lose if Russia defaults on its debts. But Russia accounts for less than 2 per cent of German exports and the DM50 billion owed to German banks is a tiny fraction of their worldwide lendings.

Most exporters are insured against non-payment by Russian customers and many have further insurance policies to protect them from currency fluctuations.

The banks with most to lose are investment banks, mostly British and American, which bought short-term, high-interest, Russian state bonds. Although investors made up to 200 per cent profits from such bonds when the going was good, most German banks avoided them as excessively risky.

Ms Andrea von Knoop, Germany's chief economic representative in Russia, says that, contrary to some media reports, it is business as usual for most German companies in Russia.

"Of course, they are observing events with some concern. But I don't know of even one who wants to throw in the towel," she said.

If German firms already in Russia are planning to stay, few companies are rushing to join them and many are thinking twice about any trade links with Russia. Mr Hans Peter Stihl, head of the German Conference of Industry and Trade, believes that such caution is understandable but should not be exaggerated.

"I wouldn't build a factory there right now and I would urge caution in setting up distribution networks too. But I would certainly maintain relationships with Russian trade partners. In the medium term, the Russian market offers a giant potential to German companies," he said.

Economists are confident that the Russian crisis will have little impact on Germany's own economic performance and are more concerned about problems in Asia. Even then, with strong economies in the EU and North America accounting for more than 80 per cent of German exports, most German firms will survive the current difficulties.

Stockmarket analysts expect the market to recover current losses before the end of the year and the small investors who first bought stocks when Deutsche Telekom was floated two years ago are those most likely to get cold feet now.

One man who may be secretly smiling as Russia remains turbulent is Chancellor Helmut Kohl, who hopes to win a record fifth term in office later this month. Dr Kohl is trailing in every opinion poll but the crisis has offered him a chance to pose in his favourite role as an indispensable international statesman.

According to the chancellor's biographer, Mr Klaus Dreher, Dr Kohl's advisers are determined to exploit the Russian crisis to the full during the final weeks of the campaign.

"He will now present himself as the great crisis manager, as a politician whose advice is listened to by Clinton and Yeltsin. His party will sell Kohl as an anchor of stability in a stormily changing world," he said.