Just a few weeks ago, Germany planned to expropriate a major Russian corporation. Now Russia is getting serious. A mechanical engineer gets caught between the two fronts.
Bielefeld – Since Russia has been actively waging war against Ukraine, Western countries have been trying to put pressure on Vladimir Putin through economic sanctions. The expropriation of the Russian Rosneft group was also already under discussion. Russia, in turn, is looking for options to harm the West economically - and is expropriating the mechanical engineering company DMG Mori.
Company name |
DMG MORI Aktiengesellschaft |
Order intake 2023 (DMG MORI) |
2.58 billion euros |
Increase in sales in 2023 |
6.0 percent |
EBIT margin |
8.8 percent |
Vladimir Putin takes DMG Mori plant under his control
The factory in question has existed since 2015. A year after Russia's invasion of Crimea, which violated international law, DMG Mori opened a factory in Ulyanovsk, Russia. The mechanical engineer wanted to produce turning and milling machines there – “Made in Russia for Russia”. According to the magazine
Schweizer MaschinenMarkt,
the investment volume was around 70 million euros. Less than nine years later, the Russian government took control of the plant.
The takeover of control should initially be provisional, Russian officials said. DMG Mori was pessimistic. “However, we assume that the Russian government’s decision is final and that complete expropriation will follow,” Wirtschaftswoche quoted
company
spokeswoman Katharina Contu as saying. The damage is said to amount to more than 90 million euros - which the German-Japanese mechanical engineering company is now claiming from the federal government.
The background to this: DMG Mori had secured itself from the federal government by means of an investment guarantee before the plant was even built. The federal government grants such contracts to protect German direct investments abroad against financial losses due to political risks. According to the Federal Ministry for Economic Affairs, Germany had guaranteed around 28.5 billion euros in 2023 alone to protect such investments.
Russia in the Ukraine War: DMG Mori plant has apparently been idle for a long time
This is unlikely to change much about DMG Mori's business operations. As the company itself stated, it had already stopped all activities in Russia in the spring of 2022 - almost at the start of the Ukraine war. “At the moment the impression is given that we have broken our promise,” wrote a company spokesman in autumn 2023. “This accusation against DMG Mori is 100 percent false and we reject it with all our might.”
After February 24, 2022, the group no longer delivered any machines or components to Russia. “In addition, we have completely cut off any external IT connection to Russia in order to make on-site operations impossible,” the company explained. However, it is “very likely” that machines manufactured before the Ukraine war ended up being sold “without the knowledge or consent” of the responsible management. The company wanted to check how this could have happened.
Escalation in the expropriation dispute with Putin's Russia
The Russian expropriation creates a new level of escalation in the economic conflict with Germany. Plans to expropriate Russian companies are also on the table in the Federal Republic, for example when it comes to the Russian company Rosneft. Just a few weeks ago, Russia reacted violently to a possible expropriation of Rosneft and spoke of a “devaluation” of Germany's attractiveness as a business location. Kremlin spokesman Peskov also considered retaliation, for example confiscating German assets.
The difference: Federal Economics Minister Robert Habeck (Greens) ultimately decided against expropriation - for the time being. In addition, the European Union (EU) is currently looking for ways to confiscate billions of dollars in frozen Russian assets. It remains to be seen what the Western reaction to Russia's expropriation of DMG Mori will be.