PARIS – French energy companies operating in the Russian Arctic Sea. Luxury Italian shops near Red Square. German car factories around southern Russia.
As the United States and the European Union impose sanctions to punish Russia for its aggression in Ukraine, European companies are bracing for the possibility that sanctions on Moscow could also hurt. for them.
Sanctions, including preventing governments and banks from borrowing in global financial markets, blocking technology imports and freezing the assets of influential Russians, have been introduced to mitigate harm the Russian economy while doing as little damage as possible within the European Union, French Finance Minister Bruno Le Maire said on Friday.
However, thousands of foreign companies that have done business in Russia for years are bracing for an inevitable recession, and the war in Ukraine threatens to disrupt supply chains and drag the economy down. Europe’s economy went down as soon as the country started to recover from the Covid lockdown.
“The attack on Ukraine represents a turning point in Europe,” Christian Bruch, chief executive officer of Germany-based Siemens Energy, a maker of turbines and generators, said this week. “We as a company now have to analyze exactly what this situation means for our business.”
European Union is Russia’s largest trading partner, accounting for 37 percent of Russia’s global trade in 2020. Much of that is energy: About 70 percent of Russia’s gas exports and half its oil exports. This country is to Europe.
And while sales to Russia account for only about 5% of Europe’s total trade with the world, for decades the country has been an important destination for European companies in a wide range of industries, including finance, agriculture and food, energy, automotive, aerospace and luxury goods. .
Some European companies, especially in Germany, have had business relations with Russia for centuries. Deutsche Bank and Siemens, the large conglomerate that is the parent company of Siemens Energy, have been doing business here since the late 19th century. During the Cold War, economic ties were seen as the way to maintain a relationship across the Curtain. iron.
After the collapse of the Soviet Union, Western companies came to Russia for different reasons, whether to sell Renaults or Volkswagens to the country’s growing urban middle class, or to cater to a group of wealthy classes looking for Italian and French luxuries. Others want to sell German tractors to Russian farmers, or buy Russian titanium for planes.
While some multinationals, such as Deutsche Bank, have scaled back their dealings in Russia after annexing Crimea during a 2014 military operation, others have worked actively to increased their market share in recent years and have boldly expanded their Russian business – even as President Vladimir V. Putin prepares to invade neighboring Ukraine.
Last month, 20 senior Italian leaders held a video call with Putin to talk about strengthening economic ties while Russian troops were massing on the border of Ukraine and European leaders. are discussing sanctions.
Directors of UniCredit bank, tire company Pirelli, state utility Enel and others listened for more than half an hour as Putin talked about Italian business opportunities and investments in Russia.
The appeal, held on January 25, has been controversial with European politicians and highlights the conflicting economic interests facing Europe as it moves to punish Moscow with sanctions. a series of sanctions for attacking Ukraine. A similar call set for next week with German business leaders, including those from energy firm Uniper and supermarket chain Metro, was adjourned only to Thursday.
But with huge economic assets at stake, European Union leaders have in recent days sought to get on the right track with respect to the scope of sanctions, which has not come before the crisis. the broader economic containment demanded by some Ukraine supporters.
At one point in frenzied negotiations this week, Italy’s representatives sought to remove goods made by its luxury industry from any sanctions package. They also argued for narrower sanctions bypassing major crackdowns on Russian banks, as well as Austria, whose country Raiffeisen International maintains hundreds of branches in Russia, the diplomats said. said.
More notable is that bypassing sanctions could hurt Russia’s energy imports to Europe, in which a group of influential energy companies from Paris to Berlin holds a major interest. The allies also did not shut the Russian economy off from a global payments system known as SWIFT, used by banks in 200 countries, drawing condemnation from critics who say the leaders European leaders are putting economic benefits ahead of human losses for Ukraine.
It is a comfort for European countries whose companies have a large presence in Russia.
As for France alone, 35 of the 40 largest French companies listed on the country’s CAC 40 stock exchange have significant Russian investments, from Auchan supermarkets on the streets of Moscow, to operations. liquefied natural gas engine of French energy giant TotalEnergies in the Yamal peninsula, above the Arctic Circle. All but two of the 40 companies listed on the DAX index in Frankfurt have investments in Russia.
According to the French Finance Ministry, about 700 French subsidiaries are active in Russia in a variety of industries employing more than 200,000 workers.
While Mr. Le Maire pledged that the impact on the French economy from the sanctions would be minimal, the impact on some French companies remains unclear.
Russia’s Attack on Ukraine and the Global Economy
An increased concern. Russia’s attack on Ukraine could send energy and food prices skyrocketing and could spook investors. The economic damage from supply disruptions and economic sanctions will be severe in some countries and industries and go unnoticed in others.
Among the most exposed was French carmaker Renault, which has two factories in Russia and is a leading carmaker there through a partnership with Avtovaz, the company that makes the Lada, the car. Most popular car in Russia. Russia is Renault’s second largest market after France.
Last week, Luca de Meo, the company’s chief executive officer, warned that aggravating tensions between Russia and Ukraine could lead to “another supply chain crisis” for the company.
That problem has been with Volkswagen, which said on Friday that it will suspend operations for several days next week at two plants in eastern Germany that make electric vehicles because of deliveries of key parts from the region. Western Ukraine was disrupted by fighting.
Volkswagen could also be affected by sanctions against Russia, where since 2009 it has had a factory in Kaluga employing about 4,000 people producing Tiguan and Polo models, as well as the Audi Q8, Q9 and Skoda Rapid. Mercedes-Benz has a factory outside Moscow, while BMW works with a local partner. All three invest in the Russian market, and more and more consumers can afford their cars.
This week, however, as Russia rattled Ukrainian cities and world leaders moved to impose sanctions, Volkswagen said the impact on its business in Russia would be “constantly linked.” defined by a crisis group”.
“Politics set the rules by which we operate as a company,” BMW said, and “if the framework conditions change, we will evaluate them and decide how to deal with them.”
And then there are the banks.
Austria’s Raiffeisen, Italy’s UniCredit and France’s Société Générale are among the banks with significant ties to Russia. According to data from the Bank for International Settlements, Italian and French banks had claims of about $25 billion in Russia at the end of last year.
France, Italy and Germany are the main European powers calling for Russia not to be cut off from the SWIFT global payment system. Cutting off Russia would make it harder for European creditors to get money owed from Russian sources – or pay for Russian gas, which these countries have to rely on, especially in light of the energy crisis. present day of Europe.
Despite efforts to ease the pain for their countries, European officials admit the situation is likely to get worse before it improves.
“It will not be possible to prevent sectors of the German economy from being affected,” German Economy Minister Robert Habeck said on Thursday.
“The price of getting peace back, or getting back to the diplomatic table, is that we have to at least implement economic sanctions,” he said.
Liz Alderman reported from Paris and Melissa Eddy from Berlin.
https://www.nytimes.com/2022/02/26/business/russia-companies-ukraine-invasion.html Russia’s ties could hurt thousands of European companies