They do business in Russia, and now they may pay a price

They do business in Russia, and now they may pay a price
Bystanders gather in front of a board displaying an image of Russian President Vladimir Putin and a quote from the recent his address to the nation: ‘We had no other chance but to act differently’ in Saint Petersburg, on February 25, 2022. (Photo: AFP)
PARIS — French energy companies operating in Russia’s Arctic Sea, Italian luxury boutiques near Red Square, German auto factories around the Russian south. As the United States and European Union apply sanctions to penalize Russia for its invasion of Ukraine, European companies are bracing for the possibility that the punishment intended for Moscow may hurt them, too.اضافة اعلان

The sanctions, which include preventing the government and banks from borrowing in global financial markets, blocking technology imports and freezing assets of influential Russians, had been drawn up to maximize pain to the Russian economy while inflicting as little harm as possible within the EU, the French finance minister, Bruno Le Maire, said Friday.

But thousands of foreign companies that have done business in Russia for years are bracing for an inevitable economic blowback, and war in Ukraine threatens to disrupt supply chains and drag down Europe’s economy just as it was starting to recover from the lashing of COVID lockdowns.

The EU 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 Russian gas exports and half of its oil exports go to Europe.

And while sales to Russia represent just around 5 percent of Europe’s total trade with the world, for decades it has been a key destination for European companies in a range of industries, including finance, agriculture and food, energy, automotive, aerospace and luxury goods.

Some European companies, especially in Germany, have had business ties to Russia for centuries. Deutsche Bank and Siemens, the massive conglomerate that is the parent company of Siemens Energy, have been doing business there since the late 19th century. During the Cold War, economic ties were seen as a way to maintain relations across the Iron Curtain.

After the fall 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 growing cadre of wealthy elites seeking Italian and French luxuries. Other wanted to sell German tractors to Russian farmers, or to acquire Russian titanium for airplanes.

While some multinationals, such as Deutsche Bank, drew down their dealings in Russia after its annexation of Crimea in a 2014 military operation, others have worked assiduously to grow their market share in recent years, and had been boldly angling to expand their Russian business — even as President Vladimir Putin prepared to invade the neighboring country of Ukraine.

More notable is the omission of sanctions that would harm Russian energy imports to Europe, in which a phalanx of influential energy companies from Paris to Berlin hold major interests. Nor did allies shut Russia’s economy from the global payment system known as SWIFT, which is used by banks in 200 countries, drawing condemnation from critics who said Europe’s leaders were putting economic interests above the human toll on Ukraine.

That is a comfort for European countries whose companies have huge corporate presence in Russia.

For France alone, 35 of the 40 biggest French companies listed on the country’s CAC 40 stock exchange have significant Russian investments, from Auchan supermarkets on the streets of Moscow, to the liquefied natural gas operations of the 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.

Despite the efforts to minimize the pain to their own countries, European officials acknowledged the situation would probably get worse before it improves.

“It will not be possible to prevent sectors of the German economy from being affected,” the German economy minister, Robert Habeck, said Thursday. 

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