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Western Companies Head For the Exit in Russia as Sanctions Tighten

Cars are stopped at a roadblock set by civil defensemen at a road leading to central Kyiv, Ukraine, Monday, Feb. 28, 2022. (AP)
Cars are stopped at a roadblock set by civil defensemen at a road leading to central Kyiv, Ukraine, Monday, Feb. 28, 2022. (AP)
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Western Companies Head For the Exit in Russia as Sanctions Tighten

Cars are stopped at a roadblock set by civil defensemen at a road leading to central Kyiv, Ukraine, Monday, Feb. 28, 2022. (AP)
Cars are stopped at a roadblock set by civil defensemen at a road leading to central Kyiv, Ukraine, Monday, Feb. 28, 2022. (AP)

Energy giant BP, global bank HSBC and the world's biggest aircraft leasing firm AerCap joined a growing list of companies looking to exit Russia on Monday, as Western sanctions tightened the screws on Moscow over its invasion of Ukraine.

The West has moved to punish Russia with a raft of measures, including closing airspace to Russian aircraft, shutting out some Russian banks from the SWIFT global financial network and restricting Moscow's ability to use its $630 billion foreign reserves.

Russia's economy was already reeling on Monday. The rouble plunged as much as 30% to an all-time low, while the central bank doubled its key interest rate to 20%, kept stock markets and derivative markets closed and temporarily banned brokers from selling securities held by foreigners.

BP, Russia's biggest foreign investor, abruptly announced at the weekend it was abandoning its 20% stake in state-controlled Rosneft at a cost of up to $25 billion, cutting the British firm's oil and gas reserves in half and production by a third.

BP's decision, following British government talks, shone a spotlight on other Western companies with stakes in Russian oil and gas projects, such as ExxonMobil, TotalEnergies and Shell.

Equinor, the energy firm majority owned by the Norwegian state, said it would start divesting its joint ventures in Russia, although a spokesperson said: "It will take some time to untangle a business developed over decades."

Norway's sovereign wealth fund, the world's largest, will also divest its Russian assets, worth about $2.8 billion, while Australia's sovereign wealth fund said it planned to wind down its exposure to Russian-listed companies.

No-go zone

Large parts of the Russian economy will be a no-go zone for Western banks and financial firms after the decision to cut off some of its banks from SWIFT, a secure messaging system used for trillions of dollars' worth of transactions around the world.

The European arm of Sberbank, Russia's biggest lender, faces failure, the European Central Bank warned on Monday, after a run on its deposits.

British bank HSBC said it was starting to wind down relations with a host of Russian banks including the second-largest, VTB, one of those targeted by sanctions, a memo seen by Reuters showed.

Amid the tightening squeeze, even neutral Switzerland said it was adopting European Union sanctions and freezing assets of some Russian individuals and companies. It joined others by imposing sanctions on President Vladimir Putin and other officials.

Some Western companies were suspending operations while others were drawing up contingency plans as they reviewed the rapidly changing landscape for business with Russia.

Daimler Truck is planning to freeze its business activities in Russia with immediate effect, including cooperation with Russian truck maker Kamaz.

Swedish automaker Volvo Cars will suspend shipments of cars to the Russian market until further notice.

Swedish telecoms group Ericsson said it was suspending deliveries to Russia while it assessed the potential impact of sanctions, according to an internal memo. Ericsson could not be reached for comment.

Shipping group Maersk said it was considering suspending all container bookings in and out of Russia.

Several companies with exposure to Russia had their shares pummeled on Monday. Nokian Tyres tumbled after withdrawing its 2022 guidance. It said last week it was shifting some production to Finland from Russia.

Shares in Societe Generale, which owns Russia's Rosbank, and carmaker Renault, which controls Russian carmaker Avtovaz, also fell.

Tit-for-tat

Finnair lost a fifth of its value after withdrawing its 2022 outlook amid airspace closures.

Russia said it was barring airlines from 36 countries from its airspace, including European nations and Canada which had earlier shut their airspace to Russian aircraft. US officials said Washington was considering a similar move.

Leasing firms said they would terminate hundreds of aircraft leases with Russian airlines because of sanctions. Russia has 980 passenger jets in service, with 777 leased and 515 rented from foreign firms, analytics firm Cirium said.

Ireland's AerCap Holdings, the world's biggest plane lessor with about 5% of its fleet leased to Russian airlines, said it would halt leasing to Russia. AerCap's shares dropped more than 12% on Monday.

Asian lessor BOC Aviation said most of its planes in Russia, or about 4.5% of its fleet, would be affected.

US-based United Parcel Service Inc and FedEx Corp , two of the world's largest logistics companies, said they were halting deliveries to Russia and Ukraine.

The EU has banned Russian media outlets RT and Sputnik, while Canadian telecoms operators also stopped offering the RT channel. Google has barred RT and other Russian channels from receiving money for ads on websites, apps and YouTube videos, similar to a move by Facebook.

The EU's internal market chief told the chief executives of Google-owner Alphabet and its YouTube unit on Sunday to ban users pushing war propaganda as part of measures to halt disinformation on Ukraine.

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Notable Shift in Agriculture, Food World Map Expected in Next Decade

Kashmiri farmers assemble freshly harvested plums to pack the fruit for export, at an orchard on the outskirts of Srinagar, India (EPA)
Kashmiri farmers assemble freshly harvested plums to pack the fruit for export, at an orchard on the outskirts of Srinagar, India (EPA)
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Notable Shift in Agriculture, Food World Map Expected in Next Decade

Kashmiri farmers assemble freshly harvested plums to pack the fruit for export, at an orchard on the outskirts of Srinagar, India (EPA)
Kashmiri farmers assemble freshly harvested plums to pack the fruit for export, at an orchard on the outskirts of Srinagar, India (EPA)

Emerging economies have increasingly driven global agricultural market developments over the last 20 years and are projected to continue to do so over the next decade, but with regional shifts linked to changing demographics and new economic affluence, according to a report released on Tuesday by the Food and Agriculture Organization of the UN (FAO) and the Organization for Economic Cooperation and Development (OECD).

The OECD-FAO Agricultural Outlook 2024-2025 is the key global reference for medium-term prospects for agricultural commodity markets, and this year’s edition marks the 20th edition of the joint publication.

For two decades, the report has analyzed trends in the demographic and economic drivers of agricultural commodity supply and demand, projected the shifts in production and consumption locations, and assessed the resulting changes in international agricultural trade patterns.

According to the report, seen by Asharq Al-Awsat, a notable shift expected over the coming decade is the increasing role of India, Southeast Asia and Sub-Saharan Africa and the declining role played by China.

It said that while China accounted for 28% of growth in global consumption of agriculture and fisheries in the previous decade, its share of additional demand over the coming decade is projected to fall to 11%, attributed not only to a declining population and slower income growth but also to a stabilization of nutrition patterns.

Also, India and Southeast Asian countries are projected to account for 31% of global consumption growth by 2033, driven by their growing urban population and increasing affluence.

Among predominantly low-income regions, the report said Sub-Saharan Africa is projected to contribute a sizeable share of additional global consumption (18%), primarily due to population growth-driven demand for food.

Total agricultural and fisheries consumption (as food, feed, fuel and other industrial raw materials) is projected to grow by 1.1% annually over the next decade, with nearly all of the additional consumption projected to occur in low- and middle-income countries.

The report noted that food calorie intake is expected to increase by 7% in middle-income countries, largely due to greater consumption of staples, livestock products and fats.

Meanwhile, calorie intake in low-income countries will grow at 4%, too slowly to achieve the Sustainable Development Goal target of zero hunger by 2030.

“The Outlook confirms the need to implement strategies that bridge productivity gaps in low- and middle-income countries to increase domestic production and boost farmers’ incomes,” said FAO Director-General QU Dongyu.

For his part, OECD Secretary-General Mathias Cormann said, “This Outlook has served as a valuable reference for policy planning, providing a sound evidence base and data for medium-term prospects for agricultural commodity markets. Over the coming decade, the volumes of agricultural commodities traded globally is expected to increase between net exporting regions and net importing regions, but with regional shifts reflecting increased global consumption in India and Southeast Asian countries.”

He added, “Well-functioning agricultural markets, reducing food loss and waste, and more productive and less polluting forms of production will remain critically important for global food security and to ensure rural livelihoods can and do benefit from global agrifood value chains.”

Reducing food loss and waste

According to the report, growth in crop production is projected to be driven primarily by productivity increases on existing land rather than an expansion of the cultivated area, leading to a decline in agriculture’s global greenhouse gas (GHG) emissions intensity.

Similarly, it said a significant proportion of the growth in livestock and fish production is also expected to result from productivity improvements, although herd expansions will also contribute to production growth.

Meanwhile, direct emissions from agriculture are therefore projected to increase by 5% over the projection period.
The report said that despite these expected productivity improvements, particularly in least productive countries in Africa and Asia, significant productivity gaps are projected to persist, challenging farm incomes and food security and increasing countries’ requirements for food imports.

Also, technological gaps, limited input use and natural climatic conditions remain some of the key factors underpinning disparities in agricultural productivity, it noted.
The report also said that well-functioning international agricultural commodity markets will remain important for global food security, as 20% of calories are traded and rural livelihoods can benefit from participation in markets and global agrifood value chains.
It then revealed that the underlying causes behind the peaks in international agricultural prices experienced in 2022 are subsiding and real international reference prices for main agricultural commodities are projected to resume their slight declining trend over the next 10 years.

However, this report notes that this may not be reflected in local retail food prices.
Also, this year's Outlook features a scenario that simulates the impact of halving food losses along supply chains and food waste at the retail and consumer levels by 2030.

It said the scenario projects a potential 4% reduction in global agricultural GHG emissions by 2030, distributed relatively evenly across countries regardless of income levels.