War and Sanctions: Not Good for Business

How the Russia-Ukraine Crisis May Impact Companies

After Russian President Vladimir Putin declared two separatist regions along its border with Ukraine as independent, the US and European nations put new sanctions into place. This has the potential to disrupt operations for several multinational corporations that do business in Russia and partner with prominent business leaders there.

Major companies including oil giants BP (BP), ExxonMobil (XOM), and Shell (SHEL) have all made large investments in Russia, which is ranked eighth globally for total oil reserves. And it’s not just energy that could be affected: automaker Renault SA (RNLSY) and brewing company Carlsberg (CABGY) also have noteworthy exposure to Russia.

Big Oil Could Be Most Impacted

Analysts point out oil and gas companies are most likely to experience setbacks as a result of sanctions. Estimates say BP has around 9% of its net asset value exposed to Russia, whereas the average for European firms is 5%. Shell owns a 27.5% stake in a large offshore gas project in Russia.

Still, others note most Western companies didn’t run into many problems after Russia annexed the Crimean Peninsula in 2014. There’s some indication the current situation could be different, as both the US and Europe have promised sanctions will be more severe this time around.

Financial Institutions Also Face Risks

Market observers note while the sanctions brought against Russia have the clear potential to impact commodities, major banks also face exposure as the situation unfolds. Major Western banks such as JPMorgan Chase (JPM) and Citigroup (C) have business interests in Russia. Any sanctions brought against local lending institutions and individuals would force a severing of ties.

So far initial actions have only impacted smaller Russian banks. Sanctions have also been levied against prominent Russian oligarchs. The market is nervously watching as tension ratchets up, and for some companies it’s not hard to see why.

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