Home Business How Russia is trying to limit the scope of Western sanctions

How Russia is trying to limit the scope of Western sanctions


He is a great boxer sent to the ropes. He gets up, staggers a little, tries to get his ideas back in place after the shock, and sets off again, even if it means unleashing a few furious blows into the void. The sanctions against Russia adopted by the West were as radical as they were unexpected. They pushed the ruble into the ravine, with a 40% drop in one week. The Moscow Stock Exchange has remained closed since Monday and is not expected to reopen until March 5. But Russia’s response is gradually falling into place.

Last example to date, this Wednesday, March 2, the Russian central bank announced that it prohibited foreigners from selling their stakes in companies established on the territory. An attempt to stem the haemorrhage, while the announcements of departures of multinationals followed one another during the week, the oil giants BP, Shell and Exxon Mobil, to name but a few, abandoning their assets without even trying to resell.

These measures to prevent the flight of capital also target individuals, since it is now forbidden to leave the country with the equivalent of more than 10,000 dollars in cash.

The specter of nationalization

It remains to be seen whether the Russians will go so far as to nationalize the assets of Western companies. Dmitry Medvedev, Vladimir Putin’s liege man and now vice-president of the country’s security council, has repeatedly waved the threat in recent days.

“We will seize the assets of foreigners and foreign companies in Russia, depending on what this or that country has introduced as anti-Russian sanctions. It is possible that we nationalize the property of nationals of unfriendly countries,” he declared to a newspaper won over to the cause of the government at the beginning of the week, remarks reported by International mail.

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“The effect of nationalization for companies based in Russia would be felt above all on activity, with supply disruptions. The impact would likely be greater than the issue of asset losses,” explains Philippe Métais, business lawyer at Bryan Cave Leighton Paisner. TotalEnergies, for example, derives a significant portion of its production from its activity in Russia.

For the loss of assets, it all depends on the amortization of the investments. For an oil tanker, for example, the cost is not the same if a field has just been exploited or if the drills have been running at full speed for ten years. In any case, the Quai d’Orsay sent from 1er March a letter to 35 CAC 40 companies operating locally, advising them to leave the country.

Penalties in the sky

The Kremlin has for its part endorsed several retaliatory measures, the impact of which is however more symbolic than economic. Russian airspace is now closed to nearly 40 countries, in response to the latter’s decision to do the same. Many Western companies have already stopped serving the largest country in the world.

Still in the air, the Russian authorities are withdrawing from satellite launches thanks to Soyuz. The Russians present on the Kourou space base, in Guyana, were thus evacuated. Three launches were planned during the year. The National Center for Space Studies (Cnes) reassured about the ability to find alternatives.

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On Wednesday March 2, Russia demanded that the United Kingdom, which took part in the sanctions, withdraw from Project OneWeb, a satellite constellation project to bring the Internet. A launch is scheduled for March 5, via Soyuz, from Kazakhstan.

Energy lever

Still, the main lever for Russia is the energy tap. Europe imports nearly 40% of its gas from Russia, which is also the world’s second largest oil exporter. The barrel (brent) is above 100 dollars because of the crisis, and OPEC+, the organization which brings together producing countries and of which Russia is an important member, decided on March 2 to slightly increase its production , which will maintain record prices. The price of gas is also at peaks.

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If it is difficult for Europe to permanently do without Russian hydrocarbons as they are, the firm Energy Aspects, a consulting firm in the raw materials sector, argued at the end of the day on Wednesday March 2 that most “European oil majors do not buy Russian oil, and only a few European refiners and brokers touch it”because these big companies fear being caught up in the sanctions against Russia.

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