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Firms moving out of Russia with haste as sanctions bite

Outrage over Russia’s invasion of Ukraine has hardened opinion in the West, prompting a major flight of capital. Several US and European companies are reassessing their businesses in Russia, with some quitting the country and others suspending their commercial activity as sanctions intensify in response to the invasion of Ukraine.

Meanwhile, work has begun by the the International Criminal Court to collect evidence of possible war crimes committed in Ukraine.

Over the weekend, several Russian banks were further cut off from the international financial system. Some of the banks have been excluded from the SWIFT payments system. Others have been made to stop the Russian central bank using its $630 billion (€562 billion) of foreign reserves.

The sanctions are by far the most severe to have been leveled at Russia since the country invaded Ukraine last week, prompting huge losses to the ruble, which hit record lows.

The country’s increasing financial and political isolation is already causing significant consequences for the economy, the 11th-largest in the world by GDP.

In response on Tuesday, Russia announced a temporary ban on foreign investors selling Russian assets. “In the current sanction situation foreign entrepreneurs are forced to be guided, not by economic factors, but to make decisions under political pressure,” Russia’s Prime Minister Mikhail Mishustin said.

Here’s a look at some of the most significant announcements made by companies with regard to Russia so far.

Oil conglomerates quit Russia

The energy sector is by far Russia’s biggest, and the most significant announcements so far concern it. BP, the United Kingdom’s oil major, announced over the weekend that it would exit its 19.75% stake in Rosneft, Russia’s state-owned energy giant. That stake makes BP the largest foreign investor in Russia and ditching it could result in a $25 billion write-off.

A day after BP’s announcement, Shell also confirmed it would exit its Russian operations. Shell’s decision means pulling out of its 27.5% stake in the Sakhalin 2 liquefied natural gas plant, which is 50% owned by Gazprom. Shell is the world’s largest LNG trader.

Another European energy firm, the Norwegian state-backed Equinor, said on Monday it would begin the process of ending its joint ventures in Russia. The company has been in Russia for more than 30 years and had worked closely with Rosneft.

On Tuesday, Exxon Mobil announced it would exit its Russian gas and oil concerns, worth around $4 billion. France’s TotalEnergies says it will no longer provide funding for new Russian projects, but it will remain active in the country.

Siemens makes its move

German industrial conglomerate Siemens AG suspended much of its business operations in Russia on Wednesday, the most significant move yet by a German company. The firm said it has halted all new business and international deliveries to Russia, joining a string of Western companies from oil majors to car makers have frozen business in Russia.

“We fully support all sanctions. To this end, all new business in and international deliveries to Russia are on hold while we evaluate the full implication of all sanctions,” Siemens said.

As for its existing business in the country, Siemens said that it will continue with local service and maintenance-related activities while “ensuring strict adherence to sanctions.”

Russia accounts for just 1% of Siemens’ global sales but the company has had a presence in the country for 170 years and Russia once accounted for the vast majority of its business. It employs several thousand people in Russia.

Siemens Energy, a spin-off company, says it will also stop all new business in the country.

Boeings, Airbus, Google…iconic brands sever Russia relationship

In his State of the Union address, US President Joe Biden said “freedom will always overcome tyranny” and that Vladimir Putin’s attack was “premeditated and unprovoked.”

Boeing says it is suspending major operations in Russia, including parts, maintenance and technical support for airlines in the country. Boeing’s European rival Airbus followed its American counterpart on Wednesday, saying it has “suspended support services to Russian airlines, as well as the supply of spare parts to the country.”

Shipping group Maersk says it will temporarily halt all container shipping to and from Russia. 

Those moves came as several other iconic US brands announced some kind of Russian withdrawal on Tuesday. Apple says it has stopped sales of its physical products in the country, including iPhones. It has also disabled traffic and live incidents on its maps app “as a safety and precautionary measure for Ukrainian citizens.” The firm has also limited its Apple Pay service.

Google has dropped Russian state news and publishers from its news feeds, while Facebook parent Meta says it will limit access to Russian state news outlets so they appear less prominently on news feeds.

Microsoft says it will remove mobile apps from Russia’s state media company RT from its Windows app store. Snap, the firm behind messaging app Snapchat, has stopped running ads in Russia, Belarus and Ukraine.

US payment card firms Visa and Mastercard have also blocked several Russian financial institutions from their global networks.

Legal and accounting firms slow on withdrawal….

Some legal, accounting and consulting firms are also reviewing Russian operations but have been criticized for not withdrawing from Russia.

Consulting firm, McKinsey, condemns attack and has stated that it will no longer work with any Russian government entities, but is not pulling out of the country.

KPMG stated that it will end some client relationships to “comply with all new laws.”

Carmakers suspend exports

Several carmakers have also taken actions in Russia. Ford is suspending its joint venture with van-maker JV. That announcement follows moves by General Motors and Germany’s Daimler Truck to suspend operations in Russia. GM has suspended vehicle exports to Russia, following Sweden’s Volvo, which was the first international carmaker to suspend exports to the country.

French carmaker Renault says it will suspend some operations at assembly plants in Russia next week.

Germany’s BMW has both paused exports and will stop production in Russia, while Volkswagen has announced a suspension of deliveries of cars already in Russia to local dealerships. However, the company has a plant in Russia and so far, has given no indication it will close.

Hollywood taking action

Several entertainment companies are also cutting activity in Russia. Hollywood studios Disney, Warner Bros., and Sony Pictures have suspended the release of upcoming movies which were due to debut in Russia this month.

Netflix says it will not comply with new Russian rules to carry 20 state-backed channels on its platform in Russia. The new rules for Netflix in Russia were due to come into effect on March 1, when the online streaming platform was to come under the umbrella of Russian communications regulator Roskomnadzor, obliging it to carry state-backed broadcasts.

Commercial relationships in football are also being reviewed. German Bundesliga club Schalke 04 has canceled its long-standing sponsorship deal with Gazprom, as has European football governing body UEFA.

Meanwhile, clothes manufacturer Adidas has canceled its commercial deal with the Russian Football Union.

Source: DW News, Reuters

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