Western companies hit by sanctions due to Russia-Ukraine crisis

Large oil companies including BP plc, Exxon Mobil Corp and Shell plc have substantial investments in Russia, as do brewing giant Carlsberg A/S and auto maker Renault SA.

On Wednesday, the chief executive of Stelantis NV, the carmaker behind the Jeep, Dodge and Peugeot brands, said it was ready to move or limit production of its vehicles in Russia if Western sanctions disrupt those operations.

The relatively small size of the Russian and Ukrainian economies and the perceived difficulty of doing business there mean that exposure to these countries by multinationals outside the commodities industry is small. But some large Western groups have built business in both.

Citigroup Inc. and several major Western banks, including JPMorgan Chase & Company, do business in Russia. If approved by local lenders or individuals, these banks would have to break ties with them quickly. So far, sanctions by the US, EU and UK have been more limited – targeting a handful of smaller Russian banks and individuals. Cross-border payments, including loan repayments, may be withheld. This can mean sometimes opening complex transactions and possibly losing money, as banks, for example, are stuck with unpaid loans. Spokesmen for Citigroup and JPMorgan declined to comment.

Large European banks such as France’s Société Générale SA and Italy’s UniCredit SPA, which are local lenders in Russia, could see an increase in default rates if the Russian currency devalues ​​significantly and the economy weakens significantly. A spokesman for Societe Generale said the bank’s Russian operations accounted for about 2% of the group’s total revenue and net profit last year. UniCredit did not respond to a request for comment.

In Ukraine, ArcelorMittal SA operates one of the largest steel plants in the country and has around 29,000 local workers and contractors. The company is currently investing $300 million to improve the plant. Earlier this month, ArcelorMittal said it had contingency plans in place if the situation in Ukraine escalated.

Danish brewer Carlsberg has three breweries in Ukraine and is the largest seller of beer in the country, with a market share of 32%, the company said. The third-largest global brewer recently said it has been working on contingency plans for several weeks, though declined to give details given the uncertainty. Carlsberg also has a large business in Russia, where it has eight breweries. According to the company, sales in the country generate about 10% of the company’s total revenue.

French food and beverage giant Danone SA has two manufacturing plants in Ukraine, in the north and east of the country. Pal Mall manufacturer British American Tobacco plc has a factory in Ukraine that employs about 1,000 people. Building materials company CRH plc, a blue-chip Irish company, has five manufacturing plants in the country and has operated there since 1999. Those three companies declined to comment.

Analysts say the most exposed of the oil and gas majors is BP. The company holds a 19.75% stake in Rosneft Oil Company, and both its current and former chief executive officers sit on the Russian company’s board of directors. JPMorgan estimates that exposure to Russia accounts for about 9% of BP’s net asset value, compared to an average of 5% in the region in Europe.

Shell holds a 27.5% stake in a major offshore gas project in Russia’s Far East, 50% of which is owned by Russia’s Gazprom PJSC and supplies about 4% of the world’s liquified-natural gas market.

BP and Shell declined to comment. Executives have said in recent weeks that they will abide by any new restrictions that come into force. Exxon and France’s TotalEnergies SE also have major stakes in energy projects in Russia. TotalEnergies declined to comment and Axon could not immediately be contacted for comment.

Commodities Group Glencore plc holds a 10.55% stake in EN+ Group plc, a controlling shareholder of aluminum company United Company Russel plc. Glencore also has a small, less than 1% interest in Rosneft.

Last week, Glencore chief executive Gary Nagle said the stakes were “very insignificant in the grand scheme of things” and that the company’s trading division, which he calls marketing, could benefit from any Russian incursion. An event like this “will lead to serious disruption in some commodity markets, serious dislocation and that’s where our marketing really flourishes,” Mr. Nagle said.

Far from a commodity, French carmaker Renault SA is the most exposed in the Russian market, accounting for about 8% of the company’s earnings before interest and taxes in the country, according to research by Citi.

Renault CEO Luca de Maio told analysts on Friday that the worsening of tensions between Russia and Ukraine could lead to “another supply chain crisis involving parts coming from abroad”.

Renault has two plants in Russia, one in the city of Togliatti and the other in Izhevsk, 700 miles east of Moscow. Renault executives said 90% of the vehicles it produced in Russia were for the local market, and the company was largely financed locally.

Nevertheless, Russia remains one of Renault’s biggest markets. Along with its partner Nissan Motor Co, the French carmaker made a big bet on Russia’s auto market when it took a controlling stake in the former state-owned Lada-maker, AvtoVAZ, in 2014.

Stelantis CEO Carlos Tavares said he was unsure at this time how the western sanctions would affect his company’s car plant in Kaluga, 115 miles southeast of Moscow. Since December the facility has been ramping up production for export to Western Europe amid rising demand.

“If we can’t supply the plant, if that’s the reality, we’ll either have to move that production to other plants, or just limit ourselves,” said Mr. Tavares.