Russia’s offer to foreign companies: stay, leave or hand over the keys

Customers shop at an IKEA store in Omsk, Russia March 3, 2022. REUTERS/Stringer

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  • Broad Western Sanctions Create Minefield for Investors
  • SocGen has warned it could be stripped of Russian assets
  • Pirelli’s Russian factories continue, others seek to exit
  • Banks count each penalty cost change

MOSCOW, March 4 (Reuters) – Businesses and investors around the world faced Russian dilemmas on Friday as they weighed an offer from Moscow to speed up their exits from the country and allow them to sell their stakes to foreign investors. local managers until their return.

The options offered by First Deputy Prime Minister Andrei Belousov came a week after Russia invaded Ukraine and a day after French bank Societe Generale warned it could be stripped of its Russian operations, which has chilled companies seeking to stay in the country.

Belousov presented three alternatives for foreign companies.

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“The company continues to work fully in Russia,” he said in a statement. “Foreign shareholders transfer their share to be managed by Russian partners and can return to the market later,” he added, and: “The company is permanently ending its activities in Russia, closing the production and dismissal of employees”.

No route comes without risk. Those who stay could face a backlash in Western markets where the public has rallied to Ukraine’s cause, those transferring shares could hand over the keys with few guarantees, while those stepping down could at best suffer a big loss or may have to sell for a nominal sum.

The invasion of Russia has prompted the United States and Europe to impose sweeping sanctions, affecting everything from global payment systems to a range of high-tech products, making business in Russia increasingly complex and precarious. Read more

For ordinary Russians, this means deep economic pain.

Some multinationals such as energy majors BP and Shell (SHEL.L) have already said they are stepping down, while others have so far delayed Russia’s signing. TotalEnergies (TTEF.PA) said it would stay but not invest further.

IKEA announced plans to close stores on Thursday, but said it would pay its 15,000 Russian employees for at least three months.

NO EASY SOLUTIONS

Italian tire maker Pirelli said on Friday it was constantly monitoring the situation through a specially formed “crisis committee”, adding that it had no plans to stop any of them. other of its two Russian factories.

Rival Nokian Tires of Finland said last week it was shifting production of some product lines out of Russia.

But there are no easy solutions, even for those looking for the exit, when there are limited trade counterparts.

British insurer and asset manager Royal London has announced plans to sell its Russian assets, which it said made up only around 0.1% of its portfolio. Read more

“We can’t trade these things anyway, but as soon as we can we obviously intend to give them away,” said general manager Barry O’Dwyer.

For those looking for the door, Russia’s first deputy prime minister says an accelerated bankruptcy plan “will support the employment and social welfare of citizens so that bona fide entrepreneurs can ensure the efficient operation of businesses “.

Many companies are still trying to calculate the cost of their exposure to Russia, a figure that many believe keeps changing with each new round of sanctions announced by the United States, European Union and Britain.

So far, global companies, banks and investors have announced that they have exposure in one form or another to Russia of more than $110 billion. This number could increase. Data from research firm Morningstar, meanwhile, shows international fund exposure to the tune of $60 billion in stocks and bonds. Read more

Norway’s sovereign wealth fund, the world’s largest, said on Thursday it had written off the value of some $3 billion in assets it held in Russia.

‘EXTREME SCENARIO’

Meanwhile, SocGen, which has $20 billion in exposure to Russia, said on Thursday it had sufficient reserve for an “extreme scenario, in which the group would be stripped of ownership rights to its assets. banks in Russia”. Read more

Dutch bank ING (INGA.AS) provided an update on its exposure to Russia and Ukraine on Friday, saying around 700 million euros ($770 million) of outstanding loans were affected by “de new sanctions against specific (Russian) entities and individuals”. Read more

BASF (BASFn.DE), the world’s largest chemical group, said it was halting new business in Russia and Belarus, except those related to food production as part of humanitarian measures.

But BASF also highlighted the challenges companies now face in navigating their way through a minefield of sanctions.

“As of today, BASF will only carry out activities in Russia and Belarus that fulfill existing obligations in accordance with applicable international laws, regulations and rules,” the German chemical manufacturer said.

Swiss watchmaker Swatch Group said it would continue operations in Russia but was suspending exports “due to the difficult overall situation”.

Deutsche Bank (DBKGn.DE) said it had stress-tested its operations given it has a large technology center in Russia, but said it was confident in its ability to handle its daily activities globally.

The German lender had opened a new office in Moscow in December, a move which it said represented at the time “a significant investment and commitment to the Russian market”.

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Reporting by Reuters correspondents in Moscow, Giulio Piovaccari in Milan, Toby Sterling in Amsterdam, Silke Koltrowitz in Zurich, Tom Sims and Frank Siebelt in Frankfurt; Written by Edmund Blair; Assembly Pravin Char

Our standards: The Thomson Reuters Trust Principles.

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