Monday, August 07, 2023

Major EU firms lose 100bn euros in Russian business: Report

 

European companies suffer €100bn hit from Russia operations

Financial Times LogoFinancial Times1d ago

European companies suffer €100bn hit from Russia operations - Financial Times


Europe's biggest companies reported a combined €100 billion loss from leaving Russia, report says

Joseph Wilkins 
Aug 7, 2023, 2:32 AM PDT

European companies have lost more than €100 billion in Russia since its invasion of Ukraine, according to the Financial Times. 
From February last year, companies have been pulling out their operations en-masse from the state in response to pressure from investors and consumers.
  • The FT's survey of 600 firms' financial reports showed that 176 of these have faced balance-sheet losses as a result of the sale, closure, or reduction in Russian business. 
Most of the losses were concentrated in a few heavily-exposed sectors such as energy and utilities. 
  • Three companies – BP, Shell and TotalEnergies – faced penalties of €40.6 billion. 
  • But the losses were more than covered thanks to higher energy prices which delivered bumper profits.
If energy and utilities were excluded from the survey, the largest writedowns come from Germany's chemical and automotive industries. 
Not all companies decided to cut ties. 


Updated By: Jeffrey Sonnenfeld and Yale Research Team: Meena Ambati, Adam Arcichowski, Wiktor Babinski, Will Berkley, Ahaan Bhansali, Yash Bhansali, Forrest Michael Bomann, Michal Boron, Tristan Brigham, Jesse Bross, Adnan Bseisu, Katie Burke, Lauren Cho, Cara Chong, Adriana Coleska, Maia Cook, Cam Coyle, Khulan Erdenedalai, Paola Flores Sanchez, Jake Seymour Garza, Kevin Grold, Tamara Gruslova, Hunter Harmon, Patrik Haverinen, Georgia Hirsty, Warner Hoshide, Daniel Jensen, Aditya Kabra, Nolan Kaputa, Mateusz Kasprowicz, Jay Kauffin, Sahana Kaur, Yuto Kida, Ava Leipzig, Victoria Liando, Cate Littlefield, Kasey Maguire, Marek Malinowski, Maksimas Milta, Rémi Moët-Buonaparte, Atin Narain, Christophe Navarre, Marina Negroponte, Camillo Padulli, Jeremy Perkins, Katya Pinchuk, Yevheniia Podurets, Aranyo Ray, Dorothea Robertson, Nick Shcherban, Franek Sokolowski, Andrew Sonneborn, David Sun, Christopher Sylvester, Steven Tian, Maria Trybus, Umid Usmanov, Ryan Vakil, Daria Valska, Bryson Wiese, Chris Wright, Michal Wyrebkowski, Nicole Xing, Lara Yellin, Steven Zaslavsky, Nick Zeffiro, and Grace Zhang. 

Last Updated:

August 7, 2023

How We Do It: We have a team of experts with backgrounds in financial analysis, economics, accounting, strategy, governance, geopolitics, and Eurasian affairs with collective fluency in ten languages including Russian, Ukrainian, German, French, Italian, Spanish, Chinese, Hindi, Polish and English, compiling this unique dataset using both public sources such as government regulatory filings, tax documents, company statements, financial analyst reports, Bloomberg, FactSet, MSCI, S&P Capital IQ, Thomson Reuters and business media from 166 countries; as well as non-public sources, including a global wiki-style network of 150+ company insiders, whistleblowers and executive contacts.

 

Please click this link to see a simplified version of our list on the Yale website.

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  • According to an ongoing Yale study, just over half of the 1,000 companies that pledged to leave Russia have managed to make a clean break with the country. 
  • The tracker was last updated August 7. 
"Even if a company lost a lot of money leaving Russia, those who stay risk much bigger losses," Nabi Abdullaev, partner at strategic consultancy Control Risks, told the FT. "It turns out that cut and run was the best strategy for companies deciding what to do at the start of the war. The faster you left, the lower your loss."
After the Kremlin's seizure of Danone and Carlsberg's assets last month, experts fear that President Vladimir Putin could make it even more difficult for companies to exit Russia. The state is in the process of approving a new rule that puts the Kremlin first in line to seize the shares of strategic companies whose shareholders exit the country. 
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SENSITIVE BUT NOW UNCLASSIFIED: July 2023 (U) Review of Ukraine Foreign Assistance Coordination and Oversight

 Report Recommendations

Recommendation Number
 
1
Open Resolved
Embassy Kyiv, in coordination with the Bureau of European and Eurasian Affairs, the Bureau of Budget and Planning, and the Office of Foreign Assistance, should update its Integrated Country Strategy.

(U) Review of Ukraine Foreign Assistance Coordination and Oversight

ISP-I-23-18
Sensitive But Unclassified
Report PDF

(U) Summary of Review

(U) Since Russia’s full-scale invasion of Ukraine on February 24, 2022, Congress has appropriated a combined total of approximately $45.4 billion to the Department of State (Department) and the U.S. Agency for International Development (USAID) to aid Ukraine. This funding supports Ukraine’s military operations, provides humanitarian relief, and ensures the continuity of Ukrainian government operations. The Office of Inspector General’s (OIG) objectives in this review were to determine whether the Department and Embassy Kyiv established a strategy for Ukraine to inform and guide foreign assistance programs and whether the Department and Embassy Kyiv exercised their foreign assistance coordination and oversight responsibilities. A companion classified report addresses Embassy Kyiv’s operating status, focusing on staffing, facilities, and security issues.1

(U) OIG found that Embassy Kyiv had not updated its Integrated Country Strategy (ICS) due to staffing limitations related to the embassy’s closure and subsequent operations in wartime conditions. The ICS is a whole-of-government strategic planning document that establishes goals, objectives, and sub-objectives for an embassy. Without an updated ICS, Department bureaus and other agencies lacked guidance for designing programs and performance indicators aligned with common strategic goals. During OIG’s review, the Department began to draft a Ukraine assistance strategy for 2023–2025 and the embassy began to update its ICS. OIG also found the Department and Embassy Kyiv prepared multiple Ukraine-related strategic planning documents to guide the allocation of foreign assistance. However, each of these planning documents lacked some or all of the required elements for strategy documents outlined in 18 Foreign Affairs Manual (FAM) 301.2-4(A) and in 18 FAM 301.2-4(B), including a hierarchy of goals and subordinate objectives with clear desired results and associated performance indicators.

(U) With respect to foreign assistance coordination, OIG found that the embassy and the Bureau of European and Eurasian Affairs’ Office of the Coordinator of U.S. Assistance to Europe and Eurasia (EUR/ACE) carried out their coordination responsibilities in accordance with statutory requirements and Department standards. However, Department bureaus reported significant challenges in conducting monitoring and evaluation because of security restrictions and the limited number of staff at the embassy. 

Responding to the monitoring challenges, many program managers employed remote monitoring methods and developed other methods to verify that goods and services were used as intended, including one bureau that introduced an innovative smartphone application to securely document the delivery of equipment.

(U) OIG observed that challenges to the oversight of unprecedented levels of foreign assistance will continue until the circumstances stabilize. Staffing level increases at the embassy may enable more site visits and improved monitoring. Over the longer run, particularly as the Department plans to assist Ukraine’s recovery and reconstruction, corruption in the Ukrainian government and private sector poses risks to the effectiveness of U.S. foreign assistance that requires robust oversight.

(U) This report contains one recommendation. In its comments on the draft report, Embassy Kyiv concurred with the recommendation. OIG considers the recommendation resolved. The embassy’s response and OIG’s reply can be found in the Recommendation section of this report. The embassy’s formal written response is reprinted in its entirety in Appendix B.

 

1(U) See OIG, Review of Embassy Kyiv’s Operating Status (ISP-S-23-18, report not yet released).

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