Credit insurers such as Euler Hermes see huge risks in guaranteeing trade deals with Russia, causing the flow of exports to Moscow to slow to a trickle.
Business relationships of German banks and insurance companies in Russia have become frosty.

There are weeks when Quirin Wydra’s Russian fashion stores seem more like gas stations with their fluctuating prices. One day a pair of jeans cost 9,000 rubles, then 6,700 on another.

Mr. Wydra markets Camp David brand clothing in Moscow and St. Petersburg. The shirts with the showy emblem are popular in Germany, thanks to Dieter Bohlen, a popular music producer who wears them.

Since the brand is produced in Brandenburg, the clothes are priced in euros. To be profitable, jeans exported to Russia have to sell for at least €100, or about $119.

Last Monday, that price was equivalent to just under 7,300 rubles. On Tuesday, it was up to 7,500 rubles.

The weaker the ruble, the more expensive it is for Russians to dress like Dieter Bohlen.

Mr. Wydra wanted to open 100 shops offering Camp David products. But because of Western sanctions over Ukraine, the Russian currency has lost half of its value. As a result, fewer Russians can afford designer clothes from Germany.

We are currently quite wary because of possible risks in Russia that are difficult to evaluate. Rudolf Servatius, head of bank and credit at R + V Insurance

It makes for risky business, and Mr. Wydra’s financial backers are worried. Companies such as Euler Hermes, which offer credit insurance to cover trade losses, are backing away from Russia.

“We can’t get any insurance for inventory that will be sold in the coming two months and paid for only then," said Mr. Wydra.

Euler Hermes, the world’s largest trade-related credit insurer, recently warned that commercial bankruptcies in Russia would increase by 10 percent in 2015. The Paris-based firm, a subsidiary of German re-insurance giant Allianz, has downgraded the country even more. “We are watching Russia very carefully and identify considerable risk,” said Thomas Krings on the management board of Euler Hermes.

Previously, the insurer considered business in Russia a moderate risk.

Rudolf Servatius, responsible for banks and credit at R+V Insurance, is also concerned. “We are currently quite wary because of possible risks in Russia that are difficult to evaluate,” he said. R+V, which is based in Wiesbaden, Germany, declined to release specific figures on credit insurance for Russian business.

Atradius, an Amsterdam-based credit insurer, offered another sign of rising risk. “More and more Russian companies are requesting extended payment deadlines,” the company said.



Banks also are more cautious about issuing loans for business in Russia. “We are adapting our policies to the altered situation,” said Evgeniy Epifanov, who handles mid-sized companies in Russia for Commerzbank.

Firms recognize the situation as well. “Things aren’t getting easier; everyone wants to pass on the risk,” said Theo Brechmann, marketing director for Russia and eastern Europe at Eickhoff, a manufacturer of mining equipment in Bochum.

When Eickhoff delivers a loader to a coal mining company in Russia for €3 million, the customer usually pays off the machine within three years. To facilitate its cash flow, the German manufacturer often seeks to sell its claim to a bank. “Up to now, that wasn’t a problem,” Mr. Brechmann said. “But recently, banks have begun to demand more and more data.”

Many projects have been put on hold. Fritz Kahl, head of marketing at Amandus Kahl

Mr. Epifanov of Commerzbank pointed to two reasons why banks are increasing their scrutiny: “The sanctions and uncertain political developments are causing a palpable decline in the Russian business of German companies,” he said.

According to the association of German machine manufacturers, VDMA, exports of machinery to Russia fell by 16 percent in the first nine months of 2014, to €4.9 billion ($5.78 billion).

Amandus Kahl, a producer of recycling facilities, complained last summer that customers in eastern Europe could not receive financing. “Many projects have been put on hold,” said Fritz Kahl, head of marketing at the firm.

Despite the crisis, Mr. Wydra is not giving up on expanding his fashion stores. “Russia’s potential hasn’t changed,” he said.

Instead, Mr. Wydra is seeking more money from investors. He said he hopes to collect between €2 million and €3 million and is willing to pay at least 5 percent interest.

“Over the long term, we need an exchange rate of 60 rubles per euro,” Mr. Wydra said. “Otherwise, Russians won’t buy any Camp David clothes.”

On Monday morning, one euro cost 74 rubles.


Andreas Dörnfelder has been reporting for Handelsblatt since 2010. To contact the author: [email protected].