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Corporate world shuns Russia over Ukraine war and as Western sanctions bite

Shell petrol station logo on Sept. 29, 2021 in Birmingham, United Kingdom.
Mike Kemp | In Pictures | Getty Images

Russia’s invasion of Ukraine has prompted a fast-growing list of companies to shun Moscow, with firms scrambling to cut ties as foreign governments ratchet up punitive economic sanctions.

Russia attacked Ukraine on several fronts on Tuesday, the sixth day of the war, with a 40-mile convoy of tanks and other vehicles seen threatening the capital city of Kyiv. President Vladimir Putin’s troops continue to run into stiff Ukrainian resistance, however.

The Kremlin has found itself increasingly isolated in recent days, with the U.S. and Western allies imposing an extraordinary set of measures that have sent its currency plummeting.

The confluence of Russia’s invasion of Ukraine and the subsequent barrage of Western sanctions has triggered a mass corporate exodus from Moscow.

In an extraordinary 24-hour period through to Monday, European energy majors BP, Shell and Equinor all announced plans to bring an end to joint ventures in Russia.

“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security,” Shell CEO Ben van Beurden said on Monday.

Equinor President and CEO Anders Opedal said on Monday that the firm had decided to stop new investments into Russia because its position had become “untenable.”

BP Chair Helge Lund said on Sunday that Russia’s military action represents “a fundamental change” and the firm’s 19.75% stake in Russian-controlled oil company Rosneft “simply cannot continue.”

What are the limits now to economic decoupling from [the] West?
Nigel Gould-Davies
Senior fellow for Russia and Eurasia at the International Institute for Strategic Studies

“This is astonishing,” Nigel Gould-Davies, senior fellow for Russia and Eurasia at the International Institute for Strategic Studies, said via Twitter shortly after Shell announced it would exit all its Russian operations.

“What are the limits now to economic decoupling from [the] West?” Gould-Davies said.

Global bank HSBC, France’s Societe Generale and South Korea’s Shinhan Bank have all wound down their relationships with a host of Russian banks, putting Western sanctions on interbank messaging system SWIFT into practice.

Swedish automaker Volvo has said it will suspend car shipments to Russia until further notice, while Germany’s Daimler Truck said on Monday it would immediately freeze its business activities in the country.

The world’s biggest aircraft leasing firm AerCap said on Monday it would cease leasing activity with Russian airlines, complying with applicable sanctions against Moscow.

A Volvo badge and parking-assist camera on the grille of an automobile at a Volvo Cars AB dealership in Stockholm, Sweden, on Thursday, Aug. 19, 2021.
Mikael Sjoberg | Bloomberg | Getty Images

U.S. payment card firms Visa and Mastercard have blocked multiple Russian financial institutions from their network, following government sanctions over the Kremlin’s invasion of Ukraine.

Shipping giant Maersk on Tuesday said it would temporarily halt all container shipping deliveries to and from Russia in response to Western sanctions, according to Reuters. The company had previously warned it was considering a possible suspension to all bookings to and from Russia.

A spokesperson for Maersk was not immediately available to comment when contacted by CNBC.

Investors are also pulling out of Russian firms. Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, said on Sunday it would divest its Russian assets, while Australia’s sovereign wealth fund has announced plans to wind down Russian holdings.

‘History will judge them accordingly’

For some, cutting ties with Russia marks the end of more than three decades of investment there following the collapse of the Soviet Union in 1991.

The situation in Ukraine has prompted many to conclude that the financial and reputational risks of continuing operations in Russia are now too great.

Speaking to CNBC’s Hadley Gamble in an interview on Monday, Ukraine Foreign Minister Dmytro Kuleba implored all firms still doing business with Russia to immediately cut ties.

“The world will judge them accordingly. And history will judge them accordingly,” Kuleba said.

It comes as pressure mounts on the firms that have not yet taken action. In the energy space, for example, France’s TotalEnergies and U.S. giant ExxonMobil are now the only remaining supermajors with significant drilling operations in Russia.

When asked about these two companies, Kuleba replied: “I can call, urge, them and all other businesses. If they want to save peace, if they want to save lives of civilians, they must stop making business with Russia.”

“Cut off your business with Russia. If you have moral ground, do it immediately without any delay. Trading with Russia is financing aggression, murder of civilians and destruction of peaceful cities,” he added.

TotalEnergies on Tuesday condemned Russia’s military aggression against Ukraine and said it would no longer provide capital for new projects in Russia.

“TotalEnergies supports the scope and strength of the sanctions put in place by Europe and will implement them regardless of the consequences (currently being assessed) on its activities in Russia,” the company said.

A spokesperson for ExxonMobil was not immediately available for comment when contacted by CNBC.

Shell has said it will exit all its Russian operations, including the flagship Sakhalin 2 LNG plant in which it holds a 27.5% stake — and which is 50% owned and operated by Russian gas giant Gazprom. The company also announced plans to end its involvement in the highly contentious Nord Stream 2 pipeline project.

— CNBC’s Matt Clinch contributed to this report.

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