Firms head for exit in Russia as sanctions escalate | Russian-Ukrainian crisis

Energy giants BP and Shell, global bank HSBC and the world’s largest aircraft leasing company AerCap joined a growing list of companies seeking to leave Russia on Monday as Western sanctions tightened the screws in Moscow following its invasion of Ukraine.

The West has moved to punish Russia with a series of measures, including closing airspace to Russian aircraft, excluding some Russian banks from the global financial network SWIFT (the Society for Interbank Financial Telecommunications world) and restricting Moscow’s ability to use its 630 billion foreign dollars. reservations.

The Russian economy was already in shock on Monday. The ruble plunged to a record high as the central bank doubled its key interest rate to 20% and kept stock markets and derivatives markets closed.

Shell said on Monday it would quit all of its Russian operations, including the flagship Sakhalin-2 plant in which it has a 27.5% stake and which is 50% owned and operated by Russian gas group Gazprom.

“We cannot – and we will not – sit idly by,” Shell CEO Ben van Beurden said in a statement announcing the move and calling Russia’s attack a “senseless act of violence.” ‘military aggression’. He added that his company was talking with governments about securing Europe’s energy supply.

BP, Russia’s largest foreign investor, announced over the weekend that it was dumping its 20% stake in state-controlled Rosneft at a cost of up to $25 billion, halving reserves of British oil and gas company.

Equinor, the Norwegian state-majority energy company, said it would start divesting its joint ventures in Russia.

These decisions have shed light on other Western companies with stakes in Russian oil and gas projects, such as ExxonMobil and TotalEnergies.

Restricted zone

Much of Russia’s economy will be a no-go zone for Western banks and financial firms after the decision to cut some of the country’s banks from SWIFT, a secure messaging system used for billions of dollars in transactions around the world.

The European branch of Sberbank, Russia’s biggest lender, is at risk of bankruptcy, the European Central Bank warned on Monday, after a run on its deposits.

Britain’s HSBC bank said it was beginning to sever relations with a slew of Russian banks, including the second-largest, VTB, one of those targeted by sanctions, according to a memo seen by Reuters.

Even neutral Switzerland said it was adopting European Union sanctions and freezing the assets of some Russian people and companies. He joined others in imposing sanctions on President Vladimir Putin and other officials.

Some Western companies were suspending operations while others were making contingency plans as they considered the rapidly changing business landscape with Russia.

Nasdaq Inc and Intercontinental Exchange have temporarily halted trading in shares of Russian-based companies listed on their exchanges, their websites showed.

Global auto and truck makers, including U.S. automaker General Motors Co and Germany’s Daimler Truck, took action on Monday. Volkswagen has suspended car deliveries to dealerships in Russia and Volvo and GM have announced they will suspend exports to Russia.

“Deliveries are to resume as soon as the effects of the sanctions imposed by the European Union and the United States have been clarified,” a Volkswagen spokesman said.

It may not be soon, given the complexity of the conflict and sanctions process.

“We will likely be in this environment of a very complicated, multi-pronged and multi-faceted sanctions regime for months, if not years,” said Marcus Thompson, a London-based partner at Kirkland & Ellis.

Singapore-based container shipping company Ocean Network Express suspended bookings to and from Russia on Monday, while Maersk said it was considering doing the same.

Several companies with exposure to Russia saw their shares tumble on Monday. Nokian Tires fell after it withdrew its 2022 outlook. It said last week it was moving some production to Finland from Russia.

Shares of Societe Generale, which owns Russian Rosbank, and carmaker Renault, which controls Russian carmaker Avtovaz, also fell.

Tit for tat

Finnair lost a fifth of its value after withdrawing its 2022 outlook amid airspace closures.

Russia bans airlines from 36 countries from its airspace, including European countries and Canada that previously closed their airspace to Russian planes. US officials have said Washington is considering a similar move.

Delta Air Lines and American Airlines have voluntarily halted overflights of Russia for international routes, while United Airlines has rerouted some international flights that typically fly over Russia.

Leasing companies including AerCap Holdings, the world’s largest aircraft lessor with around 5% of its fleet leased to Russian airlines, and BOC Aviation, said they would terminate hundreds of aircraft leases. planes with Russian airlines due to sanctions. The mechanisms for recovering aircraft from Russia are unclear.

AerCap shares fell more than 12% on Monday.

United Parcel Service Inc and FedEx Corp, based in the United States, announced that they were suspending deliveries to Russia and Ukraine.

Big tech companies are juggling calls to shut down their services in Russia with what they see as a mission to give voice to dissent and protest.

Microsoft announced on Monday that it will remove Russian state media RT’s mobile apps from its Windows App Store and ban ads on Russian state-sponsored media.

Google has banned RT and other Russian channels from receiving money for ads on websites, apps and YouTube videos, similar to a decision by Facebook.

Investors are also withdrawing from Russian companies. Norway’s sovereign wealth fund, the world’s largest, will divest its Russian assets, worth around $2.8 billion, while Australia’s sovereign wealth fund said it plans to reduce its exposure to listed companies in Russia.

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