That’s how hard the Russia sanctions are hitting European companies

France’s Finance and Economy Minister Bruno Le Maire recently countered concerns that sanctions against Russia over the attack on Ukraine could also severely damage the domestic economy. Just over 1 percent of French exports go to Russia, Le Maire said. When it comes to imports, Russia accounts for less than two percent.

But while the Russian economy’s risk to the French economy as a whole is rather low, the stakes are high for some companies. Renault, which has owned the Russian car manufacturer Avtovaz with the Lada brand since 2017, is particularly affected. Russia accounts for nearly a fifth of Renault Group car sales.

Renault temporarily shut down production at its plant near Moscow on Monday, where, among other things, the SUV Kaptur is manufactured. The reason given by the group was that there were “interruptions in the supply of components”. There were also production problems at the Avtovaz plant in Tolyatti in southern Russia.

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Also affected are the retail giants of the Mulliez Group, which have greatly expanded their Russian business over the past two decades. The supermarket chain Auchan operates more than 200 branches in Russia, and the sports shop Decathlon has 60 branches.

In the French financial sector, the sanctions are causing particular concern for the major bank Société Générale and its subsidiary Rosbank. According to the newspaper “Les Echos”, various scenarios are circulating: In the worst case, the Russian offshoot could lose 2.7 billion euros in value.

Energy group TotalEnergies has a number of holdings in Russia’s oil and gas sector. CEO Patrick Pouyanné said that business in Russia accounts for three to five percent of sales. “We’ll get that under control,” he said. So far, Total does not seem to want to part with its Russian activities.

British oil companies withdraw from Russia

In Great Britain, on the other hand, the energy company BP announced that it would give up its almost 20 percent stake in the Russian oil company Rosneft. As a result, up to £25 billion may have to be written off in the first quarter. With Rosneft, BP loses a third of its oil and gas production – and around three billion in profit a year.

On Monday, the second major oil company, Shell, also announced its withdrawal from Russia. All joint ventures with the state-owned company Gazprom will be ended. The company estimates the value of the holdings at $3 billion.

Apart from that, however, Russia and Ukraine are not significant trading partners for the kingdom. Exports to the two countries are around £5 billion a year and imports around £13 billion. The biggest impact on British firms would come from rising energy and commodity prices, says CBI chief economist Rain Newton-Smith.

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London’s financial sector suffers primarily from the general uncertainty that war brings with it. In crisis situations, many market participants avoid the risk. Bankers complain that bond issues, IPOs and merger plans are being put on hold for the time being.

Russian wheat as a risk for Italian pasta

Since the sanctions of the Western governments are aimed in particular at Russian financial companies and the super-rich, some London service providers are also losing important customers. However, the major banks HSBC and Barclays emphasized last week that their business in Russia is very limited.

With a volume of almost eight billion euros, Italy is the fourth largest exporter within the EU, and more than 11,000 Italian companies are active in Russia. The Ukraine war could cost Italy a full point in terms of economic growth, the economic research institute CER in Rome has calculated.

Companies have already felt the effects of the sanctions following the annexation of Crimea: since then, exports have plummeted by more than 28 percent. The trade association Confartigianato has calculated that small and medium-sized businesses have lost almost 25 billion euros in sales as a result.

Now a further downward spiral is feared, for example in the food industry: 18 percent of Italian exports to Russia are food and beverages, especially pasta and wine. At the same time, the war in Ukraine is threatening higher prices on the grain market: Italian pasta and biscuit manufacturers are quite dependent on Russian wheat exports, cattle breeders on Ukrainian corn for animal feed.

State-owned oil producer Eni announced it is selling its stake in Gazprom’s Blue Stream pipeline, which brings gas from Russia to Turkey. The Swiss-Italian logistics giant MSC announced that it would no longer accept orders to and from Russian ports.

Other large local companies include the state energy supplier Enel, which operates two gas-fired power plants and a wind farm in Russia. Cement manufacturer Buzzi Unicem controls one of the largest cement factories in the country in the Yekaterinburg region, which produces about 2.5 million tons per year. The Nutella manufacturer Ferrero has been operating a plant with 900 employees a good 180 kilometers east of Moscow since 2008.

The sectors particularly affected include the pharmaceutical industry, machine builders and the fashion and textile industry, which alone has a turnover of 1.5 billion euros in Russia. For example, the shoe manufacturer Geox makes nine percent of its sales locally. Then there is the furniture sector, which in Italy is characterized by very small and medium-sized companies, which exported products worth 400 million euros to Moscow last year.

Spain’s companies have been on a retreat for years

Spanish companies significantly scaled back ties with Russia back in 2014, when the EU imposed sanctions on the country following its annexation of the Crimean peninsula. “The sanctions back then were much more important for Spanish companies than they are now and hit the food industry in particular,” says Juan Carlos Martínez Lázaro, an economist at the Madrid Business School IE.

Spain’s main exports to Russia in 2020 included machinery, textiles and cars. However, Spanish exports to Russia accounted for only 0.15 percent of Spanish economic output.

According to Informa D&B, a data provider for the assessment of trade risks, 149 Spanish companies have branches in Russia. This includes the Spanish textile giant Inditex, which is represented in Russia with 527 stores of its brands such as Zara and Massimo Dutti.

The biggest concern for Spanish companies is the consequences of the increased gas and oil prices caused by the war. “The central banks have so far assumed that inflation will normalize from the spring – that has now become more difficult,” says economist Lázaro. The recovery of the Spanish economy could therefore be weaker.

Sweden’s furniture giant Ikea with a strong presence in Russia

The Russia sanctions weigh heavily on large Swedish corporations like Ikea. The furniture retailer is one of the ten largest foreign companies on the Russian market. The situation is “very worrying,” said an Ikea spokeswoman. The 14 furniture stores in Russia are open so far. In addition, the Swedes produce in several factories in Russia. A boycott has not yet been decided.

Even the textile retailer H&M does not want to say yet how to proceed in Russia. The group operates 168 stores in the Russian market, which is one of the group’s ten largest with sales in the last quarter of a good 200 million euros.

Swedish truck maker Volvo Lastvagnar announced on Monday that it would cease production and sales in Russia with immediate effect. Volvo employs more than 1300 people in Russia. The car manufacturer Volvo Cars, which belongs to the Chinese Geely Group, has also stopped selling cars in Russia until further notice.

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