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

German companies have paid nearly €1.72 billion in taxes to the Kremlin since Russia's invasion of Ukraine — enough to fund 10,000 attack drones targeting Ukrainian cities — yet more than half of German firms that operated in Russia before the all-out war remain there today, according to a new report.

Legally, some 250 German companies still active in Russia are doing nothing wrong. Many of these firms, such as the cheese manufacturer Hochland and the gypsum producer Knauf which produce fast-moving consumer goods are, in principle, not in violation of EU regulations.

Yet, the critics believe that contributing to the Kremlin's war chest is an issue that must be addressed.

“Companies support Russia’s war economy through the taxes they pay,” said Nezir Sinani, director of B4Ukraine, a global coalition of civil society organisations seeking to block access to the economic resources behind Russia’s aggression.

By remaining in the country, he argues, they are directly contributing to the Russian economy, meaning they are also implicated in Russia’s war of aggression.

“These foreign companies are clearly continuing to contribute to the Russian economy and thereby supporting the war,” said Sinani.

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

According to a report by the Kyiv School of Economics (KSE), B4Ukraine and the Squeezing Putin Initiative, international companies still operating in Russia paid at least $20 billion (€17.2bn) in taxes to the Russian state in 2024 alone. German companies are among them.

Since Russia's full-scale invasion of Ukraine in early 2022, the total amount has reached more than $60 billion (€51.8bn).

One example illustrates the scale: according to B4Ukraine, Russia pays about $18,400 (€16,000) per contract to recruit one person for military service in the war against Ukraine.

The sum of $60 billion equals nearly half of Russia’s 2025 defence budget — $145 billion (€125bn), according to the International Institute for Strategic Studies — enough to fund more than 1 million Russian soldiers.

What do German companies say?

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

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

KSE estimates that between 2022 and 2024, German companies paid up to $2 billion (€1.72bn) per year in various taxes to Russia — money that, according to Sinani, funds the missiles and bombs destroying Ukrainian cities.

To put it in perspective: with that money, Russia could buy around 10,000 Tehran-designed Shahed-model attack drones — one of the most common tools of terror against Ukrainian cities and other civilian targets.

Euronews has reached out to several German companies to ask why they have not fully withdrawn from the Russian market.

“(We have) a responsibility toward our roughly 1,800 employees and their families, as well as our long-standing partners of the Hochland Group in Russia,” the cheese manufacturer Hochland told Euronews in response.

The Hochland Group has three plants in Russia: one in the Moscow region, one in the village of Prokhovka in the Belgorod region — about two hours from the Ukrainian border — and one in Belinski, a small town in the Penza region.

Despite the war, the company continues to operate in Russia, as pulling out is not an option. The family-owned business says it “strongly condemns the Russian government’s unjustifiable war against the people of Ukraine.”

Nevertheless, Hochland has no plans to sell its Russian operations, despite a “significant drop in profitability in 2024,” the company told Euronews.

The company added that if it withdrew, “the Russian state would profit even more," stating Hochland has “not yet given up hope for Russia’s eventual return to the Western community of values.”

Leaving Russia a costly endeavour

Leaving Russia has become increasingly costly. In 2024, Russia announced that the exit process for foreign companies would become more expensive, according to Finance Minister Anton Siluanov, as reported by the state-run news agency Interfax. The tax on the value of a business sale rose from 15% to 35%.

The required discount companies must offer on their asset sales has also increased, from 50% to 60%. For transactions exceeding 50 billion rubles (around 526 million U.S. dollars), companies now need the approval of Russian President Vladimir Putin, according to the Russian business news outlet RBK.

Hochland operates additional sites across Europe: four in Germany, three in Poland, two in Romania, and one each in Bulgaria, Belgium and Spain.

When asked by Euronews, Hochland did not disclose how much of its total revenue comes from Russia or how much tax it pays there.

According to Russia’s Federal Tax Service, the corporate income tax rate for foreign companies there amounts to 25%, the same as for domestic firms.

But companies in Russia not only pay taxes — they also make profits. KSE estimates that the total turnover of German companies in Russia in 2024 amounted to around $21.7 billion.

As of early July, KSE reported that only 503 international companies, or 12%, had fully withdrawn from Russia by selling or liquidating their operations.

Nearly one-third (33.2%, or 1,387 companies) had suspended operations or announced plans to withdraw. Meanwhile, 2,287 companies (54.8%) remain active in the Russian market.

For German companies, 55% of those active before the invasion are still operating in Russia, according to B4Ukraine. Another 135 businesses have officially announced they will cease operations or temporarily scale back. Only 74 have completed their withdrawal through sale or liquidation.

But Sinani warns that the involvement of German companies extends far beyond mere tax payments. “By staying in Russia, these companies risk becoming entangled in the country’s war machine," he explained.

Knauf rejects accusations

That is precisely what Knauf has been accused of. According to research by the German public broadcaster ARD’s political magazine Monitor, the company was involved in Russia’s reconstruction of Mariupol, where a Knauf distributor reportedly built a housing project using the company's materials on behalf of Russia’s Ministry of Defence and advertised it publicly.

After Russia’s devastating siege in spring 2022, the Ukrainian Sea of Azov port city was left in ruins, and scores of civilians were killed or exiled.

Today, Russian media depict the city as a massive construction site, as Moscow plans to turn Mariupol into a Russian town. Images from construction sites commonly show bags bearing the Knauf logo, one of the most active German companies in Russia.

“We categorically reject all allegations that we are directly or indirectly supporting this war or the arming of the Russian military,” Knauf told Euronews.

“Knauf has no contractual relations with the Russian Ministry of Defense or with any authorities subordinate to it,” the company stated.

Knauf insists that its Russian subsidiaries do not supply products to state entities. The company says its Russian-made materials are sold almost exclusively to independent construction retailers. The company claims it has no way to control which customers retailers sell to after purchasing its products.

In 2024, Knauf also announced its intention to withdraw from the Russian market. However, negotiations with a potential buyer regretfully failed, the company told Euronews. “The negotiation partner broke off the talks,” Knauf said. The company is currently exploring other options to implement its exit.

“Since announcing our withdrawal, the Knauf Group has not received any profits from its Russian operations,” the company said. The Russian business is managed separately by local leadership.

Knauf also emphasised its commitment to rebuilding Ukraine. It operates a plant in Kyiv with 420 employees and is building two new facilities in western Ukraine. The company supports Ukraine through product donations and renovation projects for schools, clinics, and other facilities, it told Euronews.

'Hand over the keys and leave immediately'

The German government and people have so far provided Ukraine with €44 billion in military, humanitarian and financial aid. Yet many German companies still active in Russia are undermining that support through their continued presence, Sinani said.

The economic sanctions against Russia are also less effective because international companies continue to fuel the Russian economy.

Companies support Russia’s war economy not only through taxes, he explained, but also through supply chains, technology, and training they provide.

Since the start of Russia’s all-out war on Ukraine on 24 February 2022, the EU has imposed massive sanctions on Russia, in addition to those introduced in 2014 over the annexation of Crimea, propping up the war in the Donbas and the failure to implement the Minsk agreements.

These measures include sanctions against individuals, diplomatic and visa restrictions, and economic sanctions intended to exert maximum pressure on Russia.

But nearly three years later, the war continues. Why have the sanctions not had the desired effect?

“The only reason some people believe sanctions don’t work is because they have not been fully enforced,” says Sinani. In his opinion, companies not on the EU sanctions list that nonetheless contribute to the Russian economy — and, indirectly, to the war.

"The number of German companies propping up the Russian economy is unjustifiably high", says the B4Ukraine director. There is not enough government pressure or support to push these companies toward a swift exit from the Russian market, he argues.

"Eleven years after Russia’s aggression against Ukraine began, we see very little progress in withdrawing companies from a market directly tied to financing Russia’s war machine," Sinani told Euronews.

He calls for a complete withdrawal. How? “Drop the keys and leave immediately.” There are now enough examples of how other companies have done it, he says. Sinani is convinced: there is no reason to continue doing business in Russia.

"The price companies are paying is much higher than the cost of leaving the country, because it is measured in hundreds of thousands of lives," he concluded.