European companies suffer €100bn hit from Russia operations, 6 August 2023

Europe’s biggest companies have suffered at least €100bn in direct losses from their operations in Russia since President Vladimir Putin’s full-scale invasion of Ukraine last year, according to analysis by the Financial Times.

A survey of 600 European groups’ annual reports and 2023 financial statements shows that 176 companies have recorded asset impairments, foreign exchangerelated charges and other one-off expenses as a result of the sale, closure or reduction of Russian businesses.

The aggregate figure does not include the war’s indirect macroeconomic impacts such as higher energy and commodities costs. The war has also delivered a profit boost for oil and gas groups and defence companies...

More than 50 per cent of the 1,871 European-owned entities in Russia before the war are still operating in the country, according to data compiled by the Kyiv School of Economics. European companies still present in Russia include Italy’s UniCredit, Austria’s Raiffeisen, Switzerland’s Nestlé and the UK’s Unilever.

“Even if a company lost a lot of money leaving Russia, those who stay risk much bigger losses,” said Nabi Abdullaev, partner at strategic consultancy Control Risks. “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”...

The heaviest costs of withdrawal are concentrated in a few exposed sectors. Those with the biggest writedowns and charges are oil and gas groups, where three companies alone — BP, Shell and TotalEnergies — reported combined charges of €40.6bn...Utilities took a direct hit of €14.7bn, while industrial companies, including carmakers, have suffered a €13.6bn blow. Financial companies including banks, insurers and investment firms, have recorded €17.5bn in writedowns and other charges.

Simon Evenett, economics professor at University of St Gallen, said: “You have a small number of companies which have taken a big hit. Once you get away from big ticket charges, the average writedown is probably fairly manageable given the limited Russian footprint”...

The groups still operating in Russia are taking a high-risk gamble, said Anna Vlasyuk, research fellow at KSE. The tighter exit rules introduced by Moscow since the start of the war has made expropriation likely and extracting any dividends out of these businesses is almost impossible, she said.

“Companies still there would be better off just writing the business off. I don’t think anyone is secure,” she said. “What was the pretext for appropriating Carlsberg? Is it really a national security issue? I don’t think so”...