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.



Kuwait Finance Minister Forecasts $85 Bn Deficit Over Next Four Years

Kuwait’s Finance and Investment Minister Dr. Anwar Al-Mudhaf (Asharq Al-Awsat)
Kuwait’s Finance and Investment Minister Dr. Anwar Al-Mudhaf (Asharq Al-Awsat)
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Kuwait Finance Minister Forecasts $85 Bn Deficit Over Next Four Years

Kuwait’s Finance and Investment Minister Dr. Anwar Al-Mudhaf (Asharq Al-Awsat)
Kuwait’s Finance and Investment Minister Dr. Anwar Al-Mudhaf (Asharq Al-Awsat)

Kuwait’s Finance and Investment Minister, Dr. Anwar Al-Mudhaf, anticipates a budget deficit of 26 billion dinars ($85 billion) over the next four years. Speaking to Kuwait TV, he revealed that in the past decade alone, Kuwait accumulated a deficit of 33 billion dinars ($107.7 billion), financed from state reserves.

Looking ahead to the 2024-2025 fiscal year, Kuwait expects revenues of 18.9 billion dinars ($61.7 billion) against expenditures of 24.5 billion dinars ($80 billion), resulting in a projected deficit of 5.6 billion dinars ($18.2 billion).

Al-Mudhaf emphasized the need for economic reforms, focusing on fiscal sustainability and diversifying non-oil revenues to strengthen Kuwait’s economy.

He outlined nine initiatives aimed at restructuring the budget and increasing non-oil income, stressing that these reforms are essential and supported by the country's leadership.

Regarding social support, Al-Mudhaf assured that citizens’ salaries will be unaffected, with subsidies directed more equitably to those in genuine need. He highlighted the importance of fair distribution of support, addressing disparities between individual and corporate beneficiaries.

Al-Mudhaf reaffirmed Kuwait’s commitment to economic reform through initiatives aimed at enhancing trade, tourism, and financial sectors while preserving reserves for future generations.

Moreover, the minister emphasized that the country’s ruler has directed clear efforts to boost new investment opportunities, refuting claims of impending salary or bonus cuts as untrue. He urged people not to trust social media rumors about the Ministry of Finance or any other ministry.

Regarding foreign investments, the Al-Mudhaf said: “We have multiple agreements with Chinese firms and are working on developing free trade zones.”

“The Chinese government has assigned a company to handle and represent its interests in Kuwait, particularly at Mubarak Port. Additionally, there are agreements concerning the Shaqaya project, housing developments, and the northern region,” he clarified.

Al-Mudhaf also stressed the importance of supporting the private sector, expanding trade, and diversifying financial tools.