German companies pay Russia €1.72 billion in taxes, raising concerns of funding its war in Ukraine

German companies person paid astir €1.72 cardinal successful taxes to nan Kremlin since Russia's penetration of Ukraine — capable to money 10,000 onslaught drones targeting Ukrainian cities — yet much than half of German firms that operated successful Russia earlier nan all-out warfare stay location today, according to a caller report.

Legally, immoderate 250 German companies still progressive successful Russia are doing thing wrong. Many of these firms, specified arsenic nan food shaper Hochland and nan gypsum shaper Knauf which nutrient fast-moving user equipment are, successful principle, not successful usurpation of EU regulations.

Yet, nan critics judge that contributing to nan Kremlin's warfare thorax is an rumor that must beryllium addressed.

“Companies support Russia’s warfare system done nan taxes they pay,” said Nezir Sinani, head of B4Ukraine, a world conjugation of civilian nine organisations seeking to artifact entree to nan economical resources down Russia’s aggression.

By remaining successful nan country, he argues, they are straight contributing to nan Russian economy, meaning they are besides implicated successful Russia’s warfare of aggression.

“These overseas companies are intelligibly continuing to lend to nan Russian system and thereby supporting nan war,” said Sinani.

“This is simply a loophole that must beryllium closed,” he emphasised.

According to a report by nan Kyiv School of Economics (KSE), B4Ukraine and nan Squeezing Putin Initiative, world companies still operating successful Russia paid astatine slightest $20 cardinal (€17.2bn) successful taxes to nan Russian authorities successful 2024 alone. German companies are among them.

Since Russia's full-scale penetration of Ukraine successful early 2022, nan full magnitude has reached much than $60 cardinal (€51.8bn).

One illustration illustrates nan scale: according to B4Ukraine, Russia pays astir $18,400 (€16,000) per statement to enlistee 1 personification for subject work successful nan warfare against Ukraine.

The sum of $60 cardinal equals astir half of Russia’s 2025 defence fund — $145 cardinal (€125bn), according to nan International Institute for Strategic Studies — capable to money much than 1 cardinal Russian soldiers.

What do German companies say?

German firms are nan second-largest taxpayers to nan Kremlin’s coffers, aft US companies.

In 2024, US-based businesses paid $1.2 cardinal (€1bn) successful profit taxes to nan Kremlin, while German firms spent $594 cardinal (€513.5m), according to nan KSE report co-authored pinch B4Ukraine and nan Squeezing Putin Initiative.

KSE estimates that betwixt 2022 and 2024, German companies paid up to $2 cardinal (€1.72bn) per twelvemonth successful various taxes to Russia — money that, according to Sinani, costs nan missiles and bombs destroying Ukrainian cities.

To put it successful perspective: pinch that money, Russia could bargain astir 10,000 Tehran-designed Shahed-model onslaught drones — 1 of nan astir communal devices of panic against Ukrainian cities and different civilian targets.

Euronews has reached retired to respective German companies to inquire why they person not afloat withdrawn from nan Russian market.

“(We have) a work toward our astir 1,800 labor and their families, arsenic good arsenic our long-standing partners of nan Hochland Group successful Russia,” nan food shaper Hochland told Euronews successful response.

The Hochland Group has 3 plants successful Russia: 1 successful nan Moscow region, 1 successful nan colony of Prokhovka successful nan Belgorod region — astir 2 hours from nan Ukrainian separator — and 1 successful Belinski, a mini municipality successful nan Penza region.

Despite nan war, nan institution continues to run successful Russia, arsenic pulling retired is not an option. The family-owned business says it “strongly condemns nan Russian government’s unjustifiable warfare against nan group of Ukraine.”

Nevertheless, Hochland has nary plans to waste its Russian operations, contempt a “significant driblet successful profitability successful 2024,” nan institution told Euronews.

The institution added that if it withdrew, “the Russian authorities would profit moreover more," stating Hochland has “not yet fixed up dream for Russia’s eventual return to nan Western organization of values.”

Leaving Russia a costly endeavour

Leaving Russia has go progressively costly. In 2024, Russia announced that nan exit process for overseas companies would go much expensive, according to Finance Minister Anton Siluanov, arsenic reported by nan state-run news agency Interfax. The taxation connected nan worth of a business waste roseate from 15% to 35%.

The required discount companies must connection connected their plus income has besides increased, from 50% to 60%. For transactions exceeding 50 cardinal rubles (around 526 cardinal U.S. dollars), companies now request nan support of Russian President Vladimir Putin, according to nan Russian business news outlet RBK.

Hochland operates further sites crossed Europe: 4 successful Germany, 3 successful Poland, 2 successful Romania, and 1 each successful Bulgaria, Belgium and Spain.

When asked by Euronews, Hochland did not disclose really overmuch of its full gross comes from Russia aliases really overmuch taxation it pays there.

According to Russia’s Federal Tax Service, nan firm income taxation complaint for overseas companies location amounts to 25%, nan aforesaid arsenic for home firms.

But companies successful Russia not only salary taxes — they besides make profits. KSE estimates that nan full turnover of German companies successful Russia successful 2024 amounted to astir $21.7 billion.

As of early July, KSE reported that only 503 world companies, aliases 12%, had afloat withdrawn from Russia by trading aliases liquidating their operations.

Nearly one-third (33.2%, aliases 1,387 companies) had suspended operations aliases announced plans to withdraw. Meanwhile, 2,287 companies (54.8%) stay progressive successful nan Russian market.

For German companies, 55% of those progressive earlier nan penetration are still operating successful Russia, according to B4Ukraine. Another 135 businesses person officially announced they will cease operations aliases temporarily standard back. Only 74 person completed their withdrawal done waste aliases liquidation.

But Sinani warns that nan engagement of German companies extends acold beyond specified taxation payments. “By staying successful Russia, these companies consequence becoming entangled successful nan country’s warfare machine," he explained.

Knauf rejects accusations

That is precisely what Knauf has been accused of. According to investigation by nan German nationalist broadcaster ARD’s governmental mag Monitor, nan institution was progressive successful Russia’s reconstruction of Mariupol, wherever a Knauf supplier reportedly built a lodging task utilizing nan company's materials connected behalf of Russia’s Ministry of Defence and advertised it publicly.

After Russia’s devastating siege successful outpouring 2022, nan Ukrainian Sea of Azov larboard metropolis was near successful ruins, and scores of civilians were killed aliases exiled.

Today, Russian media picture nan metropolis arsenic a monolithic building site, arsenic Moscow plans to move Mariupol into a Russian town. Images from building sites commonly show bags base nan Knauf logo, 1 of nan astir progressive German companies successful Russia.

“We categorically cull each allegations that we are straight aliases indirectly supporting this warfare aliases nan arming of nan Russian military,” Knauf told Euronews.

“Knauf has nary contractual relations pinch nan Russian Ministry of Defense aliases pinch immoderate authorities subordinate to it,” nan institution stated.

Knauf insists that its Russian subsidiaries do not proviso products to authorities entities. The institution says its Russian-made materials are sold almost exclusively to independent building retailers. The institution claims it has nary measurement to power which customers retailers waste to aft purchasing its products.

In 2024, Knauf besides announced its volition to retreat from nan Russian market. However, negotiations pinch a imaginable purchaser regretfully failed, nan institution told Euronews. “The speech partner collapsed disconnected nan talks,” Knauf said. The institution is presently exploring different options to instrumentality its exit.

“Since announcing our withdrawal, nan Knauf Group has not received immoderate profits from its Russian operations,” nan institution said. The Russian business is managed separately by section leadership.

Knauf besides emphasised its committedness to rebuilding Ukraine. It operates a works successful Kyiv pinch 420 labor and is building 2 caller accommodation successful occidental Ukraine. The institution supports Ukraine done merchandise donations and renewal projects for schools, clinics, and different facilities, it told Euronews.

'Hand complete nan keys and time off immediately'

The German authorities and group person truthful acold provided Ukraine pinch €44 cardinal successful military, humanitarian and financial aid. Yet galore German companies still progressive successful Russia are undermining that support done their continued presence, Sinani said.

The economical sanctions against Russia are besides little effective because world companies proceed to substance nan Russian economy.

Companies support Russia’s warfare system not only done taxes, he explained, but besides done proviso chains, technology, and training they provide.

Since nan commencement of Russia’s all-out warfare connected Ukraine connected 24 February 2022, nan EU has imposed monolithic sanctions connected Russia, successful summation to those introduced successful 2014 complete nan annexation of Crimea, propping up nan warfare successful nan Donbas and nan nonaccomplishment to instrumentality nan Minsk agreements.

These measures see sanctions against individuals, negotiated and visa restrictions, and economical sanctions intended to exert maximum unit connected Russia.

But astir 3 years later, nan warfare continues. Why person nan sanctions not had nan desired effect?

“The only logic immoderate group judge sanctions don’t activity is because they person not been afloat enforced,” says Sinani. In his opinion, companies not connected nan EU sanctions database that nevertheless lend to nan Russian system — and, indirectly, to nan war.

"The number of German companies propping up nan Russian system is unjustifiably high", says nan B4Ukraine director. There is not capable authorities unit aliases support to push these companies toward a swift exit from nan Russian market, he argues.

"Eleven years aft Russia’s aggression against Ukraine began, we spot very small advancement successful withdrawing companies from a marketplace straight tied to financing Russia’s warfare machine," Sinani told Euronews.

He calls for a complete withdrawal. How? “Drop nan keys and time off immediately.” There are now capable examples of really different companies person done it, he says. Sinani is convinced: location is nary logic to proceed doing business successful Russia.

"The value companies are paying is overmuch higher than nan costs of leaving nan country, because it is measured successful hundreds of thousands of lives," he concluded.