Siemens in Japan

Enduring partnership

Siemens in Russia

Siemens & Halske (S&H) made its first delivery of telegraph materials to Russia in 1851. A business relationship that started with 75 electric pointer telegraphs evolved into a long-standing, successful involvement – the Russian market even helped Siemens through a crisis a few years after the company was founded, and grew into a buyer for a wide range of electrical products. After a phase of little business activity during the Cold War, Siemens made a successful return to the Russian market at the end of the 20th century. Today it is one of the country’s most important partners for electrification, automation and digitalization. 

First steps into Eastern Europe – Siemens gets started in Russia

S&H first served the Russian market in 1851, when the company delivered 75 pointer telegraphs for the telegraph line between St. Petersburg and Moscow. During this period, Werner von Siemens made three trips to the Tsar’s empire, laying the groundwork for the company’s future involvement there. Russia was immensely important, because Siemens & Halske had got into a plight in its Prussian home market that threatened its survival, and other projects in England and France either collapsed or never got moving in the first place. In 1853, Werner von Siemens delegated his younger brother Carl to go to St. Petersburg, and over the next two years Carl got the telegraph business firmly established there.

 

During the Crimean War (1853–1855), S&H laid some 9,000 kilometers of telegraph line, running from the Prussian border to St. Petersburg, Moscow and Kiev, and onward to the Black Sea. The company also won a long-term contract to maintain the lines, guaranteeing a stable income for twelve years. In the mid-1850s, Siemens & Halske generated around 80 percent of its total revenues in Russia; at times, two-thirds of the company’s entire workforce was employed there. In 1855, the company founded a branch in St. Petersburg together with the “Siemens & Halske Contractors for the Construction and Remonte of the Telegraph Lines in the Empire.”

Russia is a country where there is a lot to earn if you know its terrain. The laziness of writing must be over. With every steamship mail (every 8 days) I expect a letter from you
Werner von Siemens to his brother Carl, 1853

Carl von Siemens became a Russian subject in 1859 and settled permanently in the capital. During the following decade, business stagnated for a time, because industrialization was slow to get under way in Russia, and there was scant private commercial demand to complement the state infrastructure projects. The Siemens brothers also operated outside their core business in electrical equipment during this period. Their ventures included a glass factory near St. Petersburg, and a copper mine and smelter, as well as a petroleum field and refinery, in the Caucasus. Further impetus only came at last with a major new project: construction of the Indo-European telegraph line from London to the British colony of India, from 1868 to 1870.

 

This project was conducted jointly by three Siemens brothers: Werner (in Berlin), Carl (in St. Petersburg) and William (in London), and by far the largest segment of the line ran across Russian territory. Siemens & Halske estimated that this construction project, with its immense logistical demands, would take some 70,000 telegraph poles; the latest telegraph technology was applied. In the 1870s, business again stagnated as Carl von Siemens went to manage operations in Britain for a decade. A new upswing arrived only after he returned to St. Petersburg in 1880.

New lines of business and entrepreneurial expansion – Siemens becomes firmly established in Russia

The dynamic young field of electrical engineering now began to forge ahead into new applications like lighting, electric railways, and industrial drives. In 1881 S&H opened its own cable factory in the St. Petersburg suburb of Chekushi – the Empire’s first large production facility for electrical equipment. A second plant was the first in Russia to begin making dynamos and electric motors. In 1882 the company presented its products at the All-Russia Industrial and Arts Exhibition in Moscow, where they attracted interest from the highest circles: Tsar Alexander III visited the company’s pavilion and took a trial ride with his entourage on the specially built electric railway – a real stroke of luck for S&H, because the company now was granted the coveted privilege of using the imperial double-headed eagle in its letterhead. But business benefits failed to materialize, because no projects for electric railways were launched in Russia for the time being, and industrial demand for dynamos and motors remained quite limited. Instead, electric lighting became the most important line of business. Carl von Siemens completed several prestigious projects in St. Petersburg, such as lighting the Nevsky Prospect, a 4.5-kilometer street in the historic city center, as well as St. Isaac’s Cathedral, in 1883. Two years later came the order to fit out the Winter Palace, where 12,000 incandescent lamps illuminated the great Winter Ball of 1887. Business was paying off: in 1886, Carl von Siemens contributed the lighting business to the “Company for Electric Illumination,” which was licensed to build and operate electric power plants and grids throughout the Empire.

Business grew explosively in the 1890s under Carl von Siemens’ successor, Hermann Görz – in part because Russia was enjoying the fastest economic growth of any country in Europe during this period. However, Görz began by having to manage a massive need for reforms, because S&H had too long neglected to modernize. It became even more urgent to catch up now that other international electric corporations like AEG, Schuckert and Westinghouse were crowding into the Russian market. Under Görz, the cable plant in Chekushi added a foundry; the main plant on Vasilievsky Island sharply expanded production capacity for railroad equipment and dynamos.

 

By 1895, S&H was already producing 514 dynamos there – a substantial increase from the year before. The company was now installing electric tram systems in several cities, including Nizhny Novgorod, Moscow, Warsaw, Odessa and Vilnius. Business with industrial customers was also picking up, and S&H soon had agencies in Moscow, Warsaw, Odessa and Kharkov. In 1895, Tsar Nicholas II ennobled Carl von Siemens for his services to the Russian electrical industry. Three years later, the Russian office was converted to an independent stock corporation. At this point Siemens & Halske Russian Electrotechnical Works (REW S&H) had some 1,200 employees.

After 1903, Siemens & Halske and the newly founded Siemens-Schuckertwerke (SSW) divided up operations between them at home in Germany into low-voltage current and heavy current segments. The change took a while longer in Russia. RSSW, the Russian Siemens-Schuckert stock company, was founded in St. Petersburg in 1913, and took over the heavy current business in the Russian market. Back in 1906, Siemens & Halske had already joined forces with AEG and Felten & Guilleaume-Lahmeyerwerke to pool their Russian cable operations in a company known as United Cable Works. By the time World War I broke out, the two Siemens parent companies and AEG controlled almost 70 percent of all capital invested in the Russian electrical industry. In 1914, REW S&H and RSSW had some 4,000 employees and 14 business offices from Riga to Vladivostok. The Moscow branch was managed by Leonid B. Krasin, who would come to play a key role for the company in later years.

Hard times – Siemens in Russia from 1914 to 1945 

When World War I broke out, the management of RSSW was transferred to Krasin, a Russian citizen, to counter the threat of suppression as an enemy-owned enterprise. Krasin would steer the company successfully through the first years of the war, during which RSSW and REW S&H began making increasing amounts of armaments. A new plant was built in Nizhny Novgorod, the workforce tripled to more than 10,000 employees, and the two parent companies significantly increased their shareholder dividends. Yet the political turbulence following the February Revolution of 1917 essentially brought business to a standstill. Finally, on June 28, 1918, the Bolsheviks now in power ordered nationalization, causing the Siemens companies to be expropriated and transferred to the hands of the Soviet Russian state. The plants became the Soviet state enterprises Elektrosila, PO Sevkabel and NPO Kositzki Works.

Amid this situation, Krasin came to play a key role for the company. Trained as an electrical engineer, and a dedicated Socialist, Krasin had worked closely with Lenin around the turn of the century, and had to emigrate from the Empire in 1908 because of his revolutionary activities. He quickly found employment at Siemensstadt in Berlin, and was able to return to Russia in 1912 thanks to the company’s advocacy. In 1918 he joined the Bolshevik revolution, and as a People’s Commissar, became Lenin’s most important advisor on foreign trade. During the years of the Civil War, 1918–1921, Krasin made several trips to western countries, where he also held negotiations with Siemens representatives about resuming the Russian business under the new Soviet government. Under one of Lenin’s slogans – “Communism is Soviet power plus electrification of the whole country” – electrifying industry, infrastructure and homes played a central role in the Bolsheviks’ economic planning. The result was that Siemens booked its first order from Soviet Russia as early as 1920, and also played a role in several concession projects in subsequent years. Among the company’s deliveries were technical equipment for a telephone system at the Kremlin, power plant equipment, and railroad accessories.

But it was not until Stalin’s industrialization policy under the First Five-Year Plan of 1928 to 1932 that the Soviet business again took on a larger scope. In cooperation with the “Elektroimport” authority, Siemens founded its own agency in Moscow in 1928. There were major orders for industrial equipment for new heavy industrial plants like those in Magnitogorsk, Kuznetsk and Zaporozhye, electrifying a railroad line in the Caucasus, and building and operating power plants. Siemens’ construction company, Siemens-Bauunion, was involved in building the Dneprostroi Dam south of Kiev, and prepared a draft plan for the Moscow Metro. The Eastern Technical Office, the unit that handled business with the Soviet Union for the whole firm, contributed as much as 6.5 percent of the company’s total revenues during these years.

But a profound disruption was ahead. After the National Socialists took power in 1933, the Soviet business largely came to a standstill. Although Siemens was able to book substantial Soviet orders again under the Hitler-Stalin Pact of 1939, few of these saw completion, because war with the Soviet Union began with the German attack of June 1941. Like many other German companies, the Siemens companies were involved in the German occupation and economic policy in occupied Soviet territory. A particular role in this regard was played by the “Reich Commissariat for the Ukraine.” Here in particular, Siemens took over electrical equipment plants as what were called “mentored” businesses, and founded several Technical Offices that were gathered together as Siemens Ukraine GmbH in 1943. Siemens Ukraine GmbH carried out construction projects to restore severely damaged infrastructure, and delivered products to the occupation organizations. But these activities were short-lived: the German retreat from Ukraine began in 1943.

A hesitant restart in the 1950s – Siemens returns to the Soviet Union 

During the immediate postwar period, Siemens made extensive reparation deliveries to the Soviet Union – especially in medical technology. The Cold War severely limited any extensive resumption of Siemens’ Soviet business. Nevertheless a cautious rapprochement began as early as 1950, when the Soviet Union opened a new trade delegation in Berlin.

 

The Berlin Technical Office was now engaged to take over “handling the Russian business as well for the start-up.” One of the first transactions was to provide electrical equipment for the ice breaker Moscow in 1956. The next large order came for SSW in 1959, when the company furnished electrical equipment for 20 locomotives built by Krupp. These locomotives then went to pull freight trains in Siberia.

The Soviet Union gradually developed into Siemens’ most important market in Eastern Europe, albeit always at a low level. The company reopened an agency of its own in Moscow in 1971. Over the next two decades, Siemens AG was involved in the Apollo-Soyuz test project, the first joint US-Soviet space flight project; it was also involved in building and expanding industrial facilities, and in 1982 it delivered all the medical equipment for the Moscow Cardiac Center. The figures for fiscal 1983/84 showed new orders for DM 138,000 and revenues of DM 216,000. At that point the workforce numbered 46 people. Business was quite predominantly in energy and automation technology, and in medical technology, which together accounted for a combined 77 percent of sales.

 

Overall, Siemens’ market share in the USSR remained very small, only 0.1 percent. But a center for automation technology in Moscow, operated jointly with Soviet partners, offered justified hopes for a brisk buildup of business in the industrial sector. Additionally, the medical technology sector saw the first postwar joint venture, Siemens-Medtechnika, in 1989. Shortly before the dissolution of the Soviet Union early in 1991, Siemens opened another branch office in Leningrad (now again called St. Petersburg).

An ending and a new beginning – Siemens and Russia in the post-Soviet era

As it did for many other companies, the end of the Soviet Union opened up access for Siemens to a market with vast potential. So from the early 1990s onward, the company established offices in 16 cities of the Russian Federation, in addition to St. Petersburg – including Yekaterinburg, Petrozavodsk, Vladivostok and Irkutsk. Siemens was involved in the expansion, modernization and completion of numerous important projects in industry, energy, information and communications, medical technology, and transportation. As early as 1991, Siemens joined Leningradsky Metallichesky Zavod to form a joint venture named “Interturbo,” which survived the end of the Soviet era a short time later. Siemens held 42 percent of Interturbo, whose gas turbines were built primarily for the European and South Asian markets. In 1995, including its minority interests, Siemens once again had almost 3,000 employees in Russia, and made about DM 40 million in direct investments. In fiscal 1997/98, new orders at Siemens AG Russia came to DM 1.1 billion, and the company was involved in a total of eight joint ventures. The main fields were power generation, plant construction and technical services, communications, transportation technology and medical technology.

Siemens sent a clear signal of how important Russia was to it in 2007, with the plan to build a new headquarters building in Moscow. The structure, ready for occupancy at last in April 2011, combined the former five locations in Moscow into a modern office concept covering more than 14,000 square meters, for some 1,300 employees. That same year, Siemens and its Russian partner, the Sinara Group, got the biggest Russian order in the company’s history. The deal would pay EUR 2 billion to produce 1,200 regional multiple-unit trains of the Desiro RUS type. Two years later, work began at the Yekaterinburg plant on making the car named “Lastochka” (“little swallow”) for the Russian railway. Thus Siemens became a part of the successful establishment of railway projects in Russia. Between 2009 and 2010 it had already delivered eight Velaro-RUS trains, which covered the Moscow–St. Petersburg route in record time at maximum speeds of 250 kilometers per hour. To date, the “Sapsan” (“peregrine falcon”) has already traveled more than 50 million kilometers in Russia, carrying some 19 million passengers. Today’s electrical industry in Russia would be inconceivable without Siemens. About 3,400 employees at eight regional offices and twelve production sites around the country make sure the company remains at the top in its core fields of electrification, automation and digitalization. In 2019 they generated EUR 1.1 billion in revenue.

Dr. Martin Lutz | Dr. Ewald Blocher