East Germans Struggle As Mark Pounds Ruble

Over the past 38 years, Kurt Mitsch's eastern German company has exported over 12, 000 plastic molding machines to the Soviet Union.


This year, Mitsch's company, Sachsische Kunststofftechnik Freital, has yet to export a single one.


"Demand for our products in this country is so huge that we could never produce enough", says Mitsch, who says he received orders for as much as 70 million Deutsche marks ($50. 25 million) this year.


"But the Russian customers have no money".


When Russia opened up to the West, it seemed to be about the only place where east German firms would have an edge over their Western competitors because of long-standing business lies and a familiarity with the Russian landscape and language.


For most eastern German firms, however, trade with Russia is down to a trickle.


The surging Deutsche mark and plummeting ruble have quickly made German products unaffordable for most Russian buyers. and nobody is eager to lend the east Germans money to bridge the gap.


"The client knows what he wants, the supplier knows what he wants", says Mitsch. "But the bureaucrats on both sides are just putting up obstacles".


Most exports from Germany to Russia are supposed to be paid with Hermes credits, export guarantees provided by the German government which give eastern German companies preferential treatment.


So far, however, little of the nearly 5 billion Deutsche marks slated for export credits to the former Soviet Union in 1991 have been approved for deals with Russia.


The German and Russian governments had been expected to finalize the list of goods eligible for credits by May, but Mitsch and his colleagues are still waiting.


According to Mitsch the German government has delayed the process by demanding various guarantees from the Russian government. German government officials, however, say the Russian government is holding up the process. German officials in Moscow have argued for a relaxation, of new Russian restrictions placed on importers.


"But all that could have been foreseen", says Mitsch. "We often ask ourselves, 'Do they really still want to do this? '"


Perhaps not. The German government was once the largest lender and investor in Russia, supplying over half the international aid to the former Soviet Union.


But the bill for bailing out the east German economy has turned out to be much higher than expected, and there is simply no more money to pay Russia's bills as well.


Pumping 150 billion Deutsche marks annually into the eastern German economy has left the government in Bonn with high interest rates, inflation, and the potential for negative economic growth in West Germany next year.


For some eastern German companies, barter may be a way out. Eko Stahl, based in Eisenhuttenstadt near the border with Poland, produces 1. 5 million tons of steel goods a year, including cold-rolled steel plates that are used for cars, tractors and machines.


This year, the factory plans to import 400, 000 tons of hot-rolled coils of steel to Germany from northern Russia, says Klaus Beyer, Eko Stahl's Moscow representative.


Rather than paying for this unfinished product, Eko Stahl sends back 300, 000 tons of cold-rolled steel sheets.


The factory makes a profit by using the remaining 100, 000 tons of Russian steel in finished products and selling them for hard currency in Germany and Western Europe.


"But it is very difficult to work here", admits Beyer. "We cannot count on anything. Every month the conditions change".