Analysis: Foreign firms' losses from exiting Russia top $107 billion

Wienerberger AG

28/03/2024 08:54

(Adds Wienerberger exit details in paragraph 7)
    By Alessandro Parodi and Alexander Marrow
       March 28 (Reuters) - The corporate exodus from Russia
since its 2022 invasion of Ukraine has cost foreign companies
more than $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  SHEL.L ,
HSBC  HSBA.L , Polymetal International  POLY.MM  and Yandex NV
 YNDX.O  have been announced, totalling nearly $10 billion and
at discounts as high as 90%. Last week, Danone  DANO.PA  said it
received regulatory approvals to dispose of its Russian assets,
taking a total loss of $1.3 billion.
    About 1,000 companies have exited. Austrian brickmaker
Wienerberger  WBSV.VI  sold its Russian factories and exited the
market, the RBC daily reported on Thursday. 
    But 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 $300 billion of the Bank of
Russia's gold and foreign exchange reserves after Russia's
invasion. Germany has nationalised Gazprom's  GAZP.MM  Germania
plant, renaming it Sefe, and placed Rosneft's  ROSN.MM  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 ringfenced 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  FORTUM.HE ,
Carlsberg  CARLb.CO , OMV  OMVV.VI  and Uniper  UN01.DE .
    Russia's state RIA news agency calculated that the West
stood to lose assets and investments worth at least $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
$288 billion.
    It said EU nations held $223.3 billion of the assets, of
which $98.3 billion was formally held by Cyprus, $50.1 billion
by the Netherlands and $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 U.S. 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  MDLZ.O  PepsiCo  PEP.O , Auchan,
Nestle  NESN.S , Unilever  ULVR.L  and Reckitt  RKT.L . Others,
including Intesa Sanpaolo  ISP.MI , are facing bureaucratic
hurdles as they try to leave.
        
($1 = 92.7000 roubles)
($1 = 0.9217 euros)

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Explainer: How the West might use Russia's frozen reserves    https://www.reuters.com/world/how-west-might-use-russias-frozen-reserves-2024-03-12/
FACTBOX-Companies sell their businesses in Russia   
 ID:nL8N31C2C2 
FACTBOX-Moscow takes control over assets of Western companies   
https://www.reuters.com/business/moscow-takes-control-over-assets-western-companies-2023-07-27/
GRAPHIC-Sector view: Company losses from Russia exits top $107
bln    https://tmsnrt.rs/43F1Cof
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 (Reporting by Alessandro Parodi in Gdansk, Alexander Marrow in
London; editing by Josephine Mason and David Evans and Miral
Fahmy)
 ((Alessandro.Parodi@thomsonreuters.com;))