# Russia’s offer to foreign firms: stay, leave or hand over the keys
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-04
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Companies Grapple with Dilemma in Russian Investments
Meta Description: Discover the tough decision faced by companies worldwide amid Russia's options for foreign firms: stay, transfer shares, or exit - each with its own risks.
URL: https://financedigest.com/russias-offer-to-foreign-firms-stay-leave-or-hand-over-the-keyshtml

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MOSCOW (Reuters) -Companies around the globe grappled with a dilemma over what to do with their Russian investments on Friday as Moscow laid out their options: stay in the country, exit entirely or hand over their holdings to local managers until they return.

First Deputy Prime Minister Andrei Belousov spelt out the government’s position a little more than a week after Russia invaded Ukraine, and a day after French bank Societe Generale sent a chill through the corporate world by saying Russian authorities could seize its assets in the country.

Belousov outlined three alternatives for foreign firms.

The [company continues to work](https://www.financedigest.com/alone-together-how-to-maintain-a-positive-company-culture-while-working-remotely.html "Alone together: How to maintain a positive company culture while working remotely") fully in Russia,” he said in a statement. Foreign shareholders transfer their share to be [managed by Russian partners](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") and can return to the market later,” he added, and: “The company permanently terminates operations in Russia, closes production and dismisses employees.

No [route comes without risks](https://www.financedigest.com/analysis-watch-out-risk-assets-the-rout-in-bonds-is-coming-your-way.html "Analysis-Watch out risk assets, the rout in bonds is coming your way"). Those staying could face a backlash in Western [markets where the public have rallied](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell") to Ukraine’s cause, those transferring shares could be handing over the keys with few guarantees, while those quitting may face a big loss at best, or might have to sell up for a nominal sum.

“It’s a complicated process,” said Darren Woods, chief executive of U.S. energy giant Exxon Mobil which is exiting [oil and gas investments that involve partnerships with Russia’s Rosneft and others worth](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report") $4 billion.

He added that it would “require careful [management and close coordination with our consortium partners.”](https://www.financedigest.com/reckon-software-goes-from-strength-to-strength-with-appointment-of-new-partner-development-manager.html "Reckon Software goes from strength to strength with appointment of new Partner Development Manager")

[Companies have had little time](https://www.financedigest.com/oxford-bus-company-outsources-for-the-first-time.html "Oxford Bus Company Outsources for the First Time") to prepare.

Russia’s invasion – which Moscow [calls a “special operation” – prompted the United States and Europe](https://www.financedigest.com/ford-to-make-call-on-europe-job-cuts-by-mid-feb-as-buyers-circle-german-site.html "Ford to make call on Europe job cuts by mid-Feb as buyers circle German site") to impose swift and sweeping sanctions, affecting everything from global payments systems to a range of hi-tech products.

Doing business in Russia has suddenly become highly complex and increasingly precarious, while ordinary [Russians are already starting to feel deep economic pain](https://www.financedigest.com/analysis-russians-feel-little-economic-pain-now-long-term-outlook-darkens.html "Analysis: Russians feel little economic pain now, long-term outlook darkens").

SHUTTING UP SHOP

Like Exxon, BP and Shell have said they are quitting, while others have held off withdrawing from Russia for now. TotalEnergies said it would stay but not invest more. Others still, such as Japan’s Toyota, suspended their factories production, while [IKEA closed its stores](https://www.financedigest.com/ikea-stores-owner-ingka-says-campaigns-help-boost-store-visits-and-sales.html "IKEA stores owner Ingka says campaigns help boost store visits and sales") but said it would pay its workers for three months.

[“Western companies probably haven’t lost so much money so quickly due to geopolitics since the Shah was overthrown in Iran,”](https://www.financedigest.com/two-thirds-of-iaea-board-backs-western-statement-pressuring-iran.html "Two-thirds of IAEA board backs Western statement pressuring Iran") said Renaissance Capital chief economist Charlie Robertson, referring to the Islamic revolution more than four decades ago that led to an exodus of Western businesses.

Yet some companies [plan to keep](https://www.financedigest.com/e-on-casts-doubt-on-german-plan-to-keep-nuclear-plants-on-standby.html "E.ON casts doubt on German plan to keep nuclear plants on standby") going. Italian tyre maker Pirelli said it had [set up a “crisis committee” to monitor developments but did not expect](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") to halt production at either of its two Russian plants.

Its rival, Finland’s Nokian Tyres, said last week it was shifting production of some [product lines](https://www.financedigest.com/infinidat-announces-public-cloud-and-data-protection-product-lines.html "INFINIDAT Announces Public Cloud And Data Protection Product Lines") out of Russia.

But there are no easy fixes even for those looking for an exit when there are [limited trading](https://www.financedigest.com/indias-carmakers-back-zero-duty-on-limited-british-imports-under-trade-deal-sources.html "India’s carmakers back zero duty on limited British imports under trade deal – sources") counterparties.

British insurer and asset manager Royal London said it planned to [sell](https://www.financedigest.com/uks-cineworld-to-not-sell-assets-individually-denies-talks-with-amc.html "UK’s Cineworld to not sell assets individually, denies talks with AMC") its Russian assets, which it said only accounted for about 0.1% of its portfolio.

We can’t [trade these things](https://www.financedigest.com/3-things-you-didnt-know-about-trading.html "3 Things you didn’t know about trading") anyway, but as soon as we can, we obviously intend to divest,” Chief Executive Barry O’Dwyer said.

For companies packing up, the [Russian first deputy prime minister said a fast-track bankruptcy plan “will support the employment and social well-being of citizens so that bona fide entrepreneurs can ensure the effective functioning of business”](https://www.financedigest.com/pizza-firm-dp-eurasia-delivers-profit-rise-evaluating-russian-business.html "Pizza firm DP Eurasia delivers profit rise, evaluating Russian business").

Many companies, meanwhile, are still trying to [count the cost](https://www.financedigest.com/analysis-east-europeans-count-their-pennies-for-christmas-as-food-costs-soar.html "Analysis-East Europeans count their pennies for Christmas as food costs soar") of their exposure to Russia, a figure that for many keeps changing with each new round of sanctions announced by the United States, the European Union and Britain.

‘EXTREME SCENARIO’

So far global companies, [banks and investors have announced they have exposure in some form to Russia of more than $110 billion](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse  billion lifeline offers limited respite to global banks"). That number could rise. Data from research [firm Morningstar shows exposure](https://www.financedigest.com/over-a-dozen-chinese-based-firms-say-they-have-minimal-exposure-to-svb.html "Over a dozen Chinese-based firms say they have minimal exposure to SVB") from international funds to the tune of $60 billion in stocks and bonds.

[Norway’s sovereign wealth fund](https://www.financedigest.com/norway-wealth-fund-employee-sues-for-workplace-gender-discrimination.html "Norway wealth fund employee sues for workplace gender discrimination"), the world’s largest, said it had written off the value of its roughly $3 billion in Russian assets.

Meanwhile SocGen, which has a $20 billion exposure to Russia, said on Thursday it had an adequate buffer for an “extreme scenario, in which the group would be stripped of property rights to its [banking assets](https://www.financedigest.com/asset-managers-on-alert-after-whatsapp-crackdown-on-banks.html "Asset managers on alert after ‘WhatsApp’ crackdown on banks") in Russia.

[Dutch bank](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") ING said its exposure to Russia and Ukraine now stood at about 700 million euros ($770 million) in outstanding loans, basing calculations on the latest sanctions, which Western states say may be tightened further.

BASF, the world’s largest chemicals group, said it was [halting new business in Russia](https://www.financedigest.com/exclusive-kazakh-mcdonalds-shut-outlets-temporarily-after-halting-supplies-from-russia-sources.html "Exclusive-Kazakh McDonald’s shut outlets temporarily after halting supplies from Russia – sources") and Belarus, except for food production for humanitarian causes. It also hinted at the minefield of new rules sanctions have introduced.

BASF will only conduct [business in Russia and Belarus that fulfils existing obligations in accordance with applicable](https://www.financedigest.com/from-sec-edgar-to-business-applications-exploring-an-alternative-to-manual-data-extraction.html "From SEC EDGAR to Business Applications: Exploring an Alternative to Manual Data Extraction") laws, regulations and international rules,” it said.

[Swiss food giant Nestle, maker of KitKat bars and Nescafe coffee, said it was halting advertising in Russia, while Swiss watchmaker](https://www.financedigest.com/dksh-sells-its-25-stake-in-swiss-luxury-watchmaker-bovet.html "DKSH sells its 25% stake in Swiss luxury watchmaker Bovet") Swatch Group said it would continue its operations in Russia but would put exports on hold.

Deutsche Bank said it had been stress-testing its operations given it has a [big technology centre in Russia but was assured it could run its everyday business](https://www.financedigest.com/smishing-is-a-new-virus-plaguing-big-business-conversational-commerce-to-the-rescue.html "‘Smishing’ is a new ‘virus’ plaguing big business – Conversational Commerce to the rescue!") globally.

The German lender had opened a new office in Moscow in December, a [move it said at the time](https://www.financedigest.com/move-over-tina-its-time-for-tara.html "Move over TINA, it’s time for TARA") represented “a significant investment and commitment to the Russian market.

[(Reporting by Reuters](https://www.financedigest.com/thomson-reuters-report-reveals-risk-compliance-staff-expect-to-see-significant-benefits-from-artificial-intelligence-ai-and-distributed-ledger-technologies.html "Thomson Reuters Report Reveals Risk & Compliance Staff Expect to See Significant Benefits from Artificial Intelligence (AI) and Distributed Ledger Technologies") correspondents in Moscow, Sabrina Valle in Houston; Giulio Piovaccari in Milan, Toby Sterling in Amsterdam, Silke Koltrowitz in Zurich, John Revill in Zurich, Tom Sims and Frank Siebelt in Frankfurt and Richa Naidu in London; Writing by Edmund Blair; Editing by Pravin Char)


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