BERLIN, Aug 27: German industry groups have stepped up their warnings about isolating Russia in a sign of mounting concern that Moscow’s diplomatic showdown with the West over Georgia could damage business relations.

Germany’s economic ties with Russia are among the closest in the world. Its exports to Russia rose by 23 per cent to 15.8 billion euros in the first half of 2008, the largest increase among Germany’s major trading partners, and about 4,600 German firms have a presence in Russia.

“German industry is worried,” Klaus Mangold, chairman of the Committee on Eastern European Economic Relations at Germany’s BDI industry association, told Reuters.

“It is important for the politicians not to give Russia the cold shoulder. Everything must be done to stop the spiral of escalation,” he said, warning against punishing Russia by excluding it from the WTO or scrapping EU-Russia talks on a new strategic partnership pact.

The Bundesbank estimates that German direct investment in Russia totalled 14 billion euros last year, up from 11.2 billion in 2006, thanks to big investments by energy group E.ON-Ruhrgas and car manufacturer Volkswagen. Mangold’s committee published a paper in May on German-Russian economic cooperation which forecast a bright future for German industry.

Contacted by Reuters, leading German firms that do business with Russia, including E.ON, chemicals group BASF, airline Lufthansa and travel group TUI, played down the consequences of the diplomatic standoff on their business.—Reuters