UPDATE 1-German trade bodies fear new EU sanctions will harm business with Russia

Thu Jul 17, 2014 10:42am EDT

Related Topics

* German business worries relations with Russia will spiral out of control

* Decline in trade puts German jobs at risk

* Brussels, Washington had no choice but to step up pressure

* Firms also suffer from different levels of EU, US sanctions (Adds further industry comments)

By Annika Breidthardt and Gernot Heller

BERLIN, July 17 (Reuters) - German industry expressed concern on Thursday that business with Russia will suffer further after the European Union stepped up sanctions on Moscow for not doing enough to ease the crisis in Ukraine.

Jens Nagel of Germany's BGA trade association said Brussels and Washington had no choice but to toughen sanctions on Russia even though it would hurt firms, but added that he was worried the process would keep "spiralling" upwards.

"I wouldn't put it past President Vladimir Putin to impose retaliatory measures to save face, as was the case after the first level of sanctions," Nagel told Reuters.

EU leaders agreed on Wednesday to sanction Russian companies deemed to have contributed to destabilising Ukraine and to block new loans to Russia through two multilateral lenders.

German exports to Russia already dropped by 14 percent to about 10 billion euros ($14 billion) in the first four months of the year, according to data from the Statistics Office.

Eckhard Cordes, head of Germany's Committee on Eastern European Economic Relations, said a decline in trade this year was already putting some 25,000 jobs at risk in Germany.

"The most recent decision for sanctions - even though they are limited to a small number of people and companies - further weigh on the general investment climate," said Cordes.

His committee represents German firms active in eastern Europe and Russia and estimates that some 6,200 German companies are active in Russia with 20 billion euros of investments there.

Some 300,000 German jobs are dependent on trade with Russia, according to estimates by the committee.

SHIFT IN TONE

The comments mark a change of tone from two months ago when German industry was still campaigning to dissuade Chancellor Angela Merkel from imposing tougher sanctions on Russia, warning of lasting damage to domestic firms and the broader economy.

But industry leaders now speak of the "primacy of politics" over business interests and Cordes echoed calls for Moscow and Kiev to make an effort to appease eastern Ukraine, defending Ukrainian President Petro Poroshenko's peace plan.

"We need an immediate ceasefire in eastern Ukraine and complete protection of the Ukrainian-Russian border," said Cordes. "Business can only contribute to rebuilding eastern Ukraine when weapons are silent."

Russia was Germany's 11th biggest commercial partner with trade of 76.5 billion euros last year, according to the Eastern Committee.

While marking a significant increase in pressure on Russia, the new EU sanctions fall short of the harder-hitting measures announced by the United States, which targeted key institutions including Gazprom, Rosneft Oil and other energy and defence companies.

The German Chamber of Industry and Commerce (DIHK) said that the discrepancy between the U.S. and EU sanctions was a problem for some German firms.

"The incompatible sanctions are posing an additional challenge for (German firms active in Russia and the United States). That concerns about every fourth German company active abroad," said Volker Treier, deputy DIHK chief.

($1 = 0.7392 Euros) (Additional reporting by Rene Wagner; Writing by Annika Breidthardt; Editing by Raissa Kasolowsky)

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