In Russian president Vladimir Putin’s most pessimistic planning, he is unlikely to have foreseen anything close to the economic turmoil inflicted on his country by an increasingly united West.
The ruble is trading at all-time lows against the dollar, interest rates have risen to 20%, and access to Russia’s foreign reserves to stem the currency’s devaluation has been made immeasurably more difficult by the latest sanctions, which also include a ban from the SWIFT financial system for several Russian banks.
While the Russian stock market remains closed, and the country increases the obstacles for investors trying to dump Russian equities, the crisis is reaching into UK and US shares that have built their value on the back of Russian business.
A wave of UK companies are feeling additional sorrows in the stock market in response to
Packaging company Mondi PLC (LSE:MNDI)'s shares fell more than 9% this morning as the group provided an update on its business in Russia, which accounts for around 12% of revenue, and Ukraine, where it employs about 100 people in the western area Lviv.
But other companies are trying to get ahead of the news and prevent a prolonged uncertainty-induced price spiral.
First, BP PLC (LSE:BP.) decided to renege on its stake in Rosneft (AIM:ROSN), the Russian state-owned mining company, in the midst of the group's 41.92% fall in the last five days on the Russian stock market.
The decision, which adds to BP’s costs in the short run in the form of exchange rate movements and asset valuations, pushed down the company’s share price 6.22% this morning.
The mammoth, US$1.3trn Norweigan oil fund also announced it would divest from Russian investments, which make up US$2.83bn of the fund.
The heat is now building on other energy companies, like Exxon Mobil Corporation (NYSE:XOM), to declare and divest their interests from Russia. These separations increasingly look like they will be good business in the long run.
But beyond the energy sector, consumer-focused companies are also licking their wounds as they prepare to wave goodbye to previous levels of Russian commerce, without the luxury of immediate divestment to provide a semblance of certainty for investors.
London-listed Coca Cola HBC AG (LSE:CCH), the bottling arm of the soft drink giant, shipped 373.3mln units to Russia last year, an 18% rise on 2020 and representative of the company’s second-biggest market behind Nigeria.
Coca-Cola HBC’s shares are down 12.44% in the last five days, and 8.29% this morning as investors cushion themselves against expected blows to that base.
Clothes brand Burberry Group PLC (LSE:BRBY) may feel the more immediate pinch as Russian billionaires are increasingly targeted by sanctions.
That wealthy demographic is believed to drive a sizeable portion of Burberry’s sales within the UK, and is among a collection of luxury brands caught up in the wider market selloff, having contracted 3.4% in the last five days.