- Since the invasion of Ukraine last year, companies have been scrambling to cut ties with Russia.
- An FT survey found that companies lost €100 billion attempting to leave the state.
- The Kremlin seized Danone’s and Carlsberg’s assets last month, Putin is determined to profit from outgoing firms.
European companies have lost more than €100 billion in Russia since its invasion of Ukraine, according to the Financial Times.
From February last year, companies have been pulling out their operations en-masse from the state in response to pressure from investors and consumers.
The FT’s survey of 600 firms’ financial reports showed that 176 of these have faced balance-sheet losses as a result of the sale, closure, or reduction in Russian business.
Most of the losses were concentrated in a few heavily-exposed sectors such as energy and utilities. Three companies – BP, Shell and TotalEnergies – faced penalties of €40.6 billion. But the losses were more than covered thanks to higher energy prices which delivered bumper profits.
If energy and utilities were excluded from the survey, the largest writedowns come from Germany’s chemical and automotive industries.
Not all companies decided to cut ties. According to an ongoing Yale study, just over half of the 1,000 companies that pledged to leave Russia have managed to make a clean break with the country. The tracker was last updated August 7.
“Even if a company lost a lot of money leaving Russia, those who stay risk much bigger losses,” Nabi Abdullaev, partner at strategic consultancy Control Risks, told the FT. “It turns out that cut and run was the best strategy for companies deciding what to do at the start of the war. The faster you left, the lower your loss.”
After the Kremlin’s seizure of Danone and Carlsberg’s assets last month, experts fear that President Vladimir Putin could make it even more difficult for companies to exit Russia. The state is in the process of approving a new rule that puts the Kremlin first in line to seize the shares of strategic companies whose shareholders exit the country.
This law may add to the increasing number of punitive measures that Putin’s regime has introduced to combat companies seeking to cease operations in his country.
In December 2022, Russia started forcing those companies selling their assets to dispose of them at a 50% discount, leading to a scramble among domestic businessmen for bargain-bin assets.
A series of lengthy legislative measures have also curtailed the speed of companies’ withdrawals.
Source : Market Insider