Western companies cut ties with Russia following invasion of Ukraine

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The logo of Russian airline Aeroflot is seen on an Airbus A320-200 in Colomiers near Toulouse, France, September 26, 2017. REUTERS/Regis Duvignau

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Feb 25 (Reuters) – Some Western companies severed ties with Russia on Friday, and others considered whether and how to do so as President Vladimir Putin’s invasion of Ukraine sparked sanctions and pressure to abandon certain business relationships. Read more

European sports and entertainment companies were among the first to announce such measures.

Premier League club Manchester United (MANU.N) has withdrawn sponsorship rights from Russian airline Aeroflot (AFLT.MM), Formula 1 has canceled the 2022 Russian Grand Prix and Eurovision Song Contest organizers declared that Russia would not be allowed to participate in this final of the year. Read more

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“The inclusion of a Russian entry in this year’s (Eurovision) competition would bring the competition into disrepute,” the European Broadcasting Union (EBU) said in a statement.

Gadget maker Dell Technologies Inc (DELL.N) said it had suspended sales in Ukraine and Russia and would closely monitor the situation to determine next steps. New US rules on exports to Russia announced Thursday covered computers, and Dell accounted for about 6% of computer shipments to Russia last quarter, according to researcher IDC.

US carrier Delta Air Lines Inc (DAL.N) said, without giving a reason, that it had suspended its codeshare service with Aeroflot.

Alexandria, Va., marketing consultant Dan Sondhelm said companies are trying to balance the reputational risk of continuing to do business with Moscow with their economic interests and fears of antagonizing some of their investors.

“It will take some time for companies to make the decision to do or not to do anything,” Sondhelm said. “It doesn’t happen overnight.”

The United States imposed sanctions on Russia on Thursday that targeted five major Russian banks, including Sberbank and VTB, the country’s two largest lenders, as well as wealthy individuals, and announced new export controls. Read more

On Friday, European Union member states agreed to freeze the European assets of Putin and his foreign minister, among other measures. Read more

Some pundits and lawyers said Western leaders would seek to end trade deals, even if they weren’t forced to, to avoid public relations issues or the bureaucracy of trying to navigate sanctions in areas such as technology exports. Read more

“What a lot of them will do is just ditch all the Russian customers. They’ll just say ‘we’re not going to do that,'” said William Reinsch, a trade expert at the Center for Strategic Studies. and international organizations and former Chief Export Officer for the US Department of Commerce.

David Smith, a partner at insurance broker McGill and Partners in London, said that even before the invasion and the sanctions he was told by two insurers that they did not want to insure a shipping company operating in Russian waters on the grounds that ‘they didn’t want to make it easy. with Russia.

“People should be thinking more and more about the moral question, it’s not just a box-ticking exercise,” Smith said.

Western consumer brands operating in the region could face a backlash. For example, several posters on Facebook responded with outrage after a verified account of McDonald’s Corp (MCD.N) announced that it was closing restaurants in Ukraine, but did not address its sites in Russia.

“Russian occupiers, military personnel and their children will continue to enjoy a variety of burgers. And my child is sitting in a bomb shelter with tears in his eyes,” one of the posters told Reuters. identifying as Vitaliy Skalsky. Ukrainian in a Facebook post.

McDonald’s representatives in the United States and Ukraine did not respond to requests for comment.

‘FALLEN FOUL’ OF CORPORATE STANDARDS

Western banks and financial firms have been studying the practical implications of the new sanctions, multiple sources in heavily regulated industries said.

The rules prohibit direct relationships with sanctioned entities and “correspondent” banking relationships that allow Russian banks to make international payments through US banks. But they are less clear on areas such as buying and selling Russian sovereign debt in secondary markets, said a senior source at a major European bank with operations in the United States.

Many details of how the sanctions will work need to be confirmed by the US Treasury’s Office of Foreign Assets Control (OFAC) and other international regulators, the source said. OFAC did not immediately respond to requests for comment.

The chief investment officer of a European asset manager has said on condition of anonymity that he plans to sell sovereign and corporate debt he holds in Russia, just as he might sell corporate bonds who has failed to take action on an issue like climate change.

“Russian stocks have not met the standard that you would have at the corporate level,” the executive said.

But customer interests might argue for a different approach, the person said. “On the other side of the deal is our client, who could lose if you sell him at a clearance sale,” the executive said.

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Reporting by Ross Kerber in Boston Additional reporting by Caroyln Cohn in London; Matt Scuffham, Hilary Russ, Danielle Kaye and David French in New York; Jeffrey Dastin in Palo Alto, CA, and Paresh Dave in Oakland, CA. Eidting by Greg Roumeliotis and Matthew Lewis

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