It was 2006 and Russia was flush with petro-dollars, pride and industrial ambition. Vladimir Putin, then president, now Prime Minister, picked a high-profile investment to showcase his country's resurgence – Airbus owner EADS, the world's biggest aerospace company.
Big mistake.
When the Germans and the French learned that Russia, through state-controlled VTB Bank, had snapped up 5 per cent of EADS and wanted more, they vibrated with fear. German Chancellor Angela Merkel and France's then-president Jacques Chirac told Russia that EADS, a strategically sensitive company, didn't need a Russian partner.
Mr. Putin seemed shocked by the Franco-German response.
After meetings with Ms. Merkel and other German officials, he said in a speech in Bavaria: “Where does the hysteria come from? European legislators have to get used to the fact that this is not the Red Army coming, but Russian businesses with money to invest.”
Scroll forward three years. Germany's recession is the deepest among the European Union's economic heavyweights. Businesses everywhere are failing or being bailed out. One big victim is Opel, the German division of bankrupt General Motors. Opel needs a rescue, and guess who is invited to do the rescuing?
Roll out the red carpet for … Mr. Putin.
In a deal that bears the marks of Ms. Merkel and Mr. Putin, Kremlin-controlled Sberbank has agreed to take 35 per cent of Opel. Canadian auto parts maker Magna International would take 20 per cent, with the balance split among GM and Opel employees. The deal is not certain. Both GM and the German government are leaving the door open to three other potential partners – Italy's Fiat, Belgian investment firm RHJ International, and Beijing Automotive – in case Magna and Sberbank trip over the fine print.
Friday, Beijing Automotive, which is controlled by the Chinese government, made a non-binding offer to buy a stake in Opel for €660-million ($1.1-billion), the Financial Times reported.
While the Chinese are coming on strong, British business minister Peter Mandelson said he expects Magna to prevail and that his government is prepared to backstop the deal to keep Opel's Vauxhall division in Britain running.
Opel may not be EADS, which makes military products as well as commercial airliners. But it is one of the best-known auto brands in Europe and a huge employer, with more than 50,000 employees, half of them in Germany.
“This does show you how much the world has changed,” said Roland Nash, the chief strategist in Moscow for Russian investment bank Renaissance Capital. “Here we have a Russian bank bailing out a German car manufacturer. A few years ago, no one would have thought this could happen.”
Russia is in recession, of course. But rising oil prices and still-hefty foreign currency reserves, last estimated at $400-billion (U.S.), mean the country is regaining some of its pre-crunch financial firepower.
A quality German auto maker such as Opel would be a catch for Russia; last year autos landed on the country's list of “strategic” industries – big businesses deemed essential to Russia's long-term global competitiveness. The auto industry made the list not so much because it's a critical industry (like banking and pipelines), but because it's a large employer that, if nurtured, could hire more workers and make a bigger contribution to the economy.
Generally speaking, strategic industries qualify for special tax breaks, investment spending and political support. And politics certainly played a role the Opel saga, which saw Mr. Putin and Ms. Merkel taking direct and prominent roles in the file.
One theory says Ms. Merkel supported the Russian Opel grab partly because she wants to ensure that Germany remains Russia's favoured natural gas customer. Russia supplies about 40 per cent of Europe's fuel imports.
