As Ukraine Heats Up, Exxon to Airbus Eye Growing Risks
As the U.S. and Europe escalate sanctions against Russia over its role in the Ukraine crisis, companies such as Exxon Mobil Corp. (XOM:US), Airbus Group NV (AIR) and Daimler AG (DAI) are facing a threat to their multibillion-dollar businesses in the country.“We have enjoyed good relationships with Russian partners,” Airbus Chief Executive Officer Tom Enders said on the sidelines of the Farnborough Air Show near London. “I would only express my hope that these relationships and partnerships will survive the current political tensions.”
In contrast to sanctions targets Iran and North Korea, Russia’s $2 trillion economy -- about the size of Italy’s -- is closely linked to global business as multinationals have piled into a promising consumer market and resource producer. That highlights the difficulty the U.S. and Europe face in trying to punish Russian President Vladimir Putin.
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The action blocks the assets of eight state-owned defense firms, including weapons-maker Kalashnikov Concern, which manufactures its namesake assault rifle. The penalties will prohibit any new financing of debt with a maturity of more than 90 days from U.S. sources.
EU Measures
European Union leaders are considering measures that would cut off some public financing of infrastructure projects in the country. Sanctions so far have primarily focused on asset freezes and visa bans for small numbers of political and military figures close to Putin.
... [CORPORATE INTERESTS ...]
Exxon has bet heavily on its relationship with Rosneft, the state energy producer that’s led by Putin confidant -- and U.S. sanctions target -- Igor Sechin. Next month Exxon expects to begin drilling an Arctic well with Rosneft that will cost as much as $700 million, the most expensive such project ever in Russia. It’s also working on a $300 million shale well project in Siberia.
In a sign of the importance of its Rosneft ties, Exxon CEO Rex Tillerson rebuffed U.S. government appeals to skip an energy forum in Putin’s hometown of St. Petersburg in May, and appeared with Sechin in Moscow last month. An Exxon spokesman said the company’s Russia plans remain unchanged.
Providers of oilfield services have found a juicy potential market in Russia, which needs the latest technology to maintain production from declining Cold War-era fields.
U.S. energy service providers Halliburton Co. ... Schlumberger Ltd. ...and National Oilwell Varco Inc. ... all have significant operations in Russia.
...Halliburton has worked closely with Gazprom ... Houston-based company, which signed a technology-sharing accord with Gazprom’s oil arm last year, “is certainly trying to make a bigger play” in Russia ... Halliburton and Varco declined to comment.COMMENT
At Canadian airplane manufacturer Bombardier Inc. (BBD/B), “there’s been a little bit more apprehension from our Russian customers to get into big transactions, not just with us,” said Guy Hachey, president of the company’s aerospace business. Along with Airbus, Bombardier has sought to build manufacturing capacity in Russia to meet demand from local airlines.
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[Russia's] ... finance ministry predicts economic growth will drop to about 0.5 percent this year ... measures would pile onto existing concerns about corruption, shoddy infrastructure, and stagnant population growth.
... automaker Daimler AG has backed away from increasing its stake in OAO KamAZ, Russia’s largest producer of heavy trucks. ...
Automakers that are strengthening their ties to Russia ...Renault SA (RNO) and Nissan Motor Co. ... last month completed a 2012 plan to tighten control of OAO AvtoVAZ, Russia’s biggest carmaker. Renault and Nissan, which gained majority control of AvtoVAZ, once described the deal as a critical bridgehead into a key emerging market. Yet when the transaction was sealed June 18, the companies didn’t even put out a press release. Renault and Nissan declined to comment.
EXTRACTS
FULL ARTICLE - SOURCE - Bloomberg Businessweek - here.
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Obviously a lot of foreign investment in Russia.
Don't know what to make of it other than that.
