Russian sanctions are already hammering Western companies

Everyone from Adidas to BP and the London Stock Exchange are already feeling the pain of US and EU sanctions against Russia.

by Rachel Savage
Last Updated: 28 Oct 2014

The EU only expanded its sanctions to cover whole areas of the Russian economy on Wednesday, but already companies and countries are warning of the pain ahead as their shares and stock markets take a hammering.

Sportswear giant Adidas’ shares plunged more than 15% yesterday, after it put out a profit warning and said it was closing more stores in Russia than it had previously planned. Fellow Germans Volkswagen and cash-and-carry and hypmarket retailer Metro reported sales had been hit in Russia and Ukraine respectively.

Meanwhile, BP, which owns a fifth of Russian energy company Rosneft, warned its profits could be hit and fellow oil major Total said on Wednesday it had stopped buying shares in Russian natural gas company Novatek on the same day MH17 was shot down in Ukraine.

The flood of Russian companies listing in London will probably also abate. ‘Until there is some clarity and some sort of positive news that shows mutual understanding, I don’t think any Russian companies will be able to come to market,’ an investment banker specialising in Russia told the FT.

European markets are taking another beating today, although that’s partly down to investors getting in a flap over upcoming US jobs data. The crisis is already expected to hurt whole economies too. Poland’s deputy prime minister said today it will shave 0.6% off the country’s GDP this year, after Russia banned most fruit and vegetables imports from the ex-Eastern Bloc nation this week.

Meanwhile, Markit warned UK manufacturing could be weighed down by Russia, as it released data showing industry activity fell in July. ‘The concern is that the slowdown we are seeing is also a symptom of increased economic uncertainty both at home and in key export markets of Europe, in turn fuelled by worries about the Ukraine crisis,’ said Markit economist Rob Dobson.

‘If the situation with Russia deteriorates further, we should expect goods exports to come under further pressure’

It probably won’t get better any time soon either, with Putin looking to be in Cold War-esque siege mentality and his relative domestic popularity shielding him from a backlash over economic pain for now. And with fighting close to the MH17 crash site still putting the brakes on a proper investigation, European countries definitely can’t be seen to be easing off Russia.

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