European CEOs Call for Simplification, Harmonization of Russia Sanctions

Both Schoellhorn and Deutsche Bank CEO Christian Sewing expressed support for the sanctions. “I think we as the Western alliance have to defend our values like democracy, liberty, freedom, and therefore we have to play our part as banks in order to help to make sure that this aggressive war comes to an end,” Sewing said. “When it comes to dealing with sanctions, obviously we stand 100% behind what was decided,” Schoellhorn said.

But Sewing said different standards among what was issued by the U.K., the U.S. and the EU have created a landscape that is “sometimes very complicated and complex.” He said that Deutsche Bank “had to implement more than 3,000 individual sanctions. That’s quite a lot.” He said improved coordination “is a wish we have for the future,” though he clarified that he did not mean any criticism.

“I don't have a silver bullet and a proposal how to make that very simple, but it's just a fact of life,” Schoellhorn said.

Part of the problem is that the sanctions “added to an already difficult supply chain situation,” between the U.S.-China rivalry, the COVID-19 pandemic and now the Russia-Ukraine war, Schoellhorn said. “Many of the critical raw materials for aviation come from countries that are sanctioned now, so the whole world was scrambling to find ways around that and find new sources and all of that. So it showed to a degree also a lack of resilience to begin with.”

Airbus is approaching the overall situation with China through what he called a “China plus one” approach, Schoellhorn said. That means that, where Airbus has a Chinese source, it also wants at least one source somewhere else. “Sometimes we also deliberately leave China and provide more resilience through doing that. But mostly it's adding, nearshoring, friendshoring,” he said. “We don’t advocate for a decoupling. We want to de-risk.”

Schoellhorn said: “Aviation is a very global business, so you cannot neglect that China has become the biggest market. So it wouldn't be shooting oneself in the foot to just say okay, we leave that market to others. By the way, the Americans have no intentions of leaving the market.”

Schoellhorn said part of Airbus’ approach is bifurcated between its defense and commercial aviation businesses. Regardless of the U.S. approach to China, Airbus must consider that its customers “have an expectation of where their main components come from,” making “friendshoring, or call it targeted sourcing” more of a consideration.

On the other hand, for Airbus’ commercial business, “when it's a global industry, and the U.S. is not behaving any differently in that regard, you need to play it globally,” Schoellhorn said.

Airbus is taking into account the risk of “if push came to shove and there was a situation, let’s say around Taiwan, that could lead to blockage sanctions and all kinds of difficulties and Chinese business would fall away,” Schoellhorn said. He said Airbus “would have to be in a position that this is not killing the company,” comparing it to “losing a finger but not losing half your body, or a vital organ.”

“We try to if -- excuse the French -- the shit hit the fan, we don't die, we move on,” Schoellhorn said.

The current global situation has put geopolitics front of mind for their companies and that won’t go away anytime soon, Sewing said. “I do believe that this what we are experiencing right now … is not something for the next two or three years. It's a new decade. It's a new era,” Sewing said. He said that Deutsche Bank’s advisory role “is changing dramatically,” with the “number of discussions we have with corporates realigning their sourcing … is triple [or] quadruple of that what we've seen before, so we need to take that into account.”

Aviation being a “global industry” means “Airbus is a very political company, so we’ve always spent quite a bit of time discussing and analyzing geopolitics,” Schoellhorn said. But while at one time there was the belief that the economy drives geopolitics, ”that logic has burst,” he said. “I think geopolitics drives economy these days, and everybody needs to think about it very much.”