As Russian troops try to advance through Ukraine in, a growing number of Western companies are announcing that they want to cut ties with Russia. Unable to prevent multinationals from fleeing, the Kremlin tries to respond legally, with restrictions on the sale of shares. A reaction which, given the importance of oil and gas, aims to prevent groups like BP and Shell from leaving and to discourage others from following suit.
In a few weeks, the lucrative energy sector in the face of rising prices for petroleum products and natural gas has become one of the threats to the third largest producer world. oil constitutes 47% of Russian exports and natural gas 6%. Any instability in the flow of income will have repercussions on the financing of the economy and the war effort to which the Kremlin has subjected the country.
Fearing that more and more companies are deciding to divest, Russian Prime Minister Mikhail Mishutin announced that Moscow was preparing a presidential decree to introduce “temporary exit restrictions”. [de investimentos estrangeiros] Russian assets”. However, it is one thing to stop the sale of financial holdings, it is quite another to ensure that the economy continues to function.
For some companies, the exit decision will end a long cycle of profitable investments. The big energy multinationals have bet heavily on Russia since the 1990s, as Bloomberg analysts pointed out, to the point that some of them are now among the biggest foreign investors. BP even became the largest, and in this condition, surprised moscow Sunday with the announcement of its intention to get rid of the 19.75% it holds in Rosneft, a sale that could lead the British company to record losses of 22.2 billion euros in its accounts.
The production of Rosneft (controlled by the Russian state) accounts for a third of BP’s oil and gas production. Three of Rosneft’s explorations predicted reach production peaks between 2022 and 2025. Even so, the British decided to leave, starting a movement that has since grown steadily.
Shell followed, with interests of 3 billion euros in Russia, and which announced on Monday that it wanted to get rid of its stakes in joint projects with the Gazprom group, in natural gas (Sakhalin-2) and in the North gas pipeline . 2.
“There is a moral imperative for British businesses to isolate Russia. This invasion must be a strategic failure for Putin,” reacted Kwasi Kwarteng, holder of the Economics portfolio in the British government. Across the Channel, his French counterpart also threw words of encouragement for a “economic and financial war against Russia”, although he later reversed himself.
At the very moment when the French company Total Energies announced a curb on investments in Russia, the Minister of Economy and Finance, Bruno Le Maire, declared in radio that the Western objective was to “sink the Russian economy”. Hours later, regretted. “The word war is not the most appropriate given our strategy to defuse the tensions of this conflict. We have nothing against the Russian people. corrected.
Total Energies did not go as far as BP and Shell. Involved in natural gas projects, controlling 19.4% of Novatek, Russia’s largest producer of liquefied natural gas. The French company maintains this participation for the moment, but “stops providing capital for new projects in Russia”.
The Mayor had argued that he was in talks with the bosses of Total and Engie, the latter linked to Nord Stream 2. Working with Russia raises, at the moment, “questions of principle”, underlined the official.
Nord Stream 2 on the brink of insolvency
Nord Stream 2, meanwhile, will be on the verge of insolvency, according to Reuters. The 140 workers of this Swiss-based company were laid off, and without the certification of the pipeline, which Germany now refuses due to the Russian invasion of Ukraine, and in the face of sanctions from Washington and Brussels, Nord Stream 2 AG will consider the declaration of insolvency. The gas pipeline, 1230 km long, cost 11 billion dollars (9.8 billion euros at the current exchange rate). Gazprom has shouldered half the bill, with Shell, Engie, OMV, Wintershall and Uniper as partners, in the project which is expected to double Germany’s Russian gas supply capacity.
An analyst quoted by Reuters is surprised that Total did not go further. Another, quoted by Bloomberg, believes, however, that other oil companies with interests in the region, such as Exxon Mobil, could, in the coming hours, join the squad of multinationals closing the door to Russia.
However, even without selling shares, many others have announced in recent hours that they are closing the door on Russia. On the business side, Adidas ended the sponsorship Russian football (the Eastern markets represent 2.9% of the brand’s turnover in 2020), and technologies such as YouTube, Netflix and Meta accompany Warner Bros. in the group of multinationals which for the moment do without the Russian market. Decisions that further reinforce isolation, after the cascading sanctions who became known in sports and in the cultural sectoraffecting until export of the last.
In the automotive industry, Volvo and Volkswagen have announced the suspension of deliveries to Russia. The Swedish brand justifies its decision by commercial risks. Heavy truck makers AB Volvo and Daimler Truck also froze sales in the country, with Daimler also severing the partnership it had with Kamaz.
General Motors also confirmed the halt in shipping the vehicles, alluding to “external factors” such as logistical issues. The world leaders in container shipping, MSC and Maersk, reduction in the transport of goods to essential goods.
In the world of law and high consultancy, the British Linklaters assured review all work related to Russia and KPMG promised to cut ties with all clients who would be in the crosshairs of Western sanctions against Russian interests. Others, like McKinsey, have abandoned clients belonging to the Russian administration, but according to can be inferred from the words of the CEOBob Sternfels, the consulting firm manages the remaining operations in Russia.
Mastercard and Visa have meanwhile blocked certain operations in the Russian market, to comply with sanctions, and other Western companies with significant investments in Russia, such as Danone, Carlsberg and Renault, and other Asian companies such as Mitsubishi, assess the impact of the war in its factories in this country.