The corporate exodus from Russia since its 2022 invasion of Ukraine has cost foreign companies more than US$107 billion in writedowns and lost revenue, a Reuters analysis of company filings and statements showed.
The volume of losses have increased by one third since the
last tally in August last year, underscoring the scale of the financial hit to
the corporate world from Moscow’s invasion, as well as highlighting the sudden
loss of Western expertise from Russia’s economy.
“As Russia’s invasion continues amid faltering Western
military aid, and the granularity of Western sanctions regimes increases,
companies still aiming to exit Russia will likely face further difficulties and
have to accept greater writedowns and losses,” said Ian Massey, Head of
Corporate Intelligence, EMEA, at global risk consultancy S-RM.
President Vladimir Putin, fresh from securing re-election in
a landslide victory widely condemned in the West as unfair and undemocratic,
now has a renewed mandate to pursue further isolation from the West, including
through additional asset seizures and political pressure, Massey added.
Moscow demands discounts of at least 50% on foreign asset
sales and has steadily tightened exit requirements, often accepting nominal
fees as little as one rouble.
So far this year, sales of assets owned by Shell, HSBC,
Polymetal International and Yandex have been announced, totalling nearly US$10
billion and at discounts as high as 90%.
Last week, Danone said it received regulatory approvals to
dispose of its Russian assets, taking a total loss of US$1.3 billion.
About 1,000 companies have exited, although hundreds of
companies including French retailer Auchan and Benetton are still operating or
have put business on hold there, according to analysis by Yale School of
Management.
Russian retaliation
Western nations froze around US$300 billion of the Bank of
Russia’s gold and foreign exchange reserves after Russia’s invasion. Germany
has nationalised Gazprom’s Germania plant, renaming it Sefe, and placed
Rosneft’s Schwedt refinery under German trusteeship.
Russia has promised to retaliate against EU proposals to
redistribute billions of euros in interest earned on its frozen assets, warning
of catastrophic consequences and saying any attempt to take its capital or
interest is “banditry”.
Western banks, too, are concerned of the legal wranglings
any confiscation may spawn.
“There are no Western assets in Russia that can be
considered safe or ring fenced so long as the Kremlin continues to wage war,”
Massey said.
Moscow has already taken temporary control of assets owned
by several Western companies including Fortum, Carlsberg, OMV and Uniper.
Russia’s state RIA news agency calculated that the West
stood to lose assets and investments worth at least US$288 billion if Moscow
were to retaliate.
It was based on data which it said showed that direct
investment by the European Union, the G7 nations, Australia and Switzerland in
the Russian economy at the end of 2022 totalled US$288 billion.
It said EU nations held US$223.3 billion of the assets, of
which US$98.3 billion was formally held by Cyprus, US$50.1 billion by the
Netherlands and US$17.3 billion by Germany.
Reuters could not verify the data cited by RIA.
But Moscow’s hardline approach inflicts damage on Russia,
too.
Lawyer Jeremy Zucker, a sanctions expert, said a
surprisingly large number of his firm’s clients across a wide range of
industries had decided to exit Russia entirely and would likely be reluctant to
return even after hostilities end.
As a result, meaningful technologies have left the country
and Russia may no longer be able to support certain high-tech production, said
Zucker, chair of US law firm Dechert’s national security practice.
“It certainly suggests to me a meaningful degree of injury
to the economy,” he told Reuters.
Key assets
A 2022 decree bans investors from “unfriendly” countries —
those that have imposed sanctions on Russia over its actions in Ukraine — from
selling shares in key energy projects and banks without explicit presidential
approval.
Meanwhile, many producers of everyday staples and consumer
goods have refrained from entirely leaving Russia, arguing that everyday people
in Russia rely on their products.
Companies still operating or doing business in Russia
include Mondelez International PepsiCo, Auchan, Nestle, Unilever, Reckitt and
British American Tobacco. Others, including Intesa Sanpaolo, are facing
bureaucratic hurdles as they try to leave.