"Should Have Withdrawn Sooner"... 144 Trillion Won Loss for European Companies Due to Putin

Energy Companies Suffer Biggest Losses
Putin's Semi-Forced Nationalization of Western Firms
Remaining Companies Likely to Face Greater Damage

After the Ukraine war, European companies have suffered direct losses exceeding 100 billion euros (approximately 144 trillion won) from their Russian operations. The Russian government is blocking the withdrawal of foreign companies and is effectively engaging in forced nationalization, so the damage to Western companies is expected to increase further.

[Image source=Yonhap News]

On the 6th (local time), major foreign media investigated the annual business reports and financial statements of 600 European companies and found that about 30%, or 176 companies, incurred asset losses of this scale due to the sale, withdrawal, or reduction of their Russian operations. This figure does not reflect indirect effects such as the surge in energy and raw material costs caused by the Ukraine war.

Energy companies were hit the hardest. Three oil and gas companies?British Petroleum (BP) from the UK, Shell, and France's TotalEnergies?suffered losses of 40.6 billion euros from their Russian operations. Utility companies incurred 14.7 billion euros in losses, the industrial sector including automobile manufacturers lost 13.6 billion euros, and financial companies such as banks, insurance firms, and investment companies suffered losses of 17.5 billion euros.

Looking at individual companies, BP announced just three days after Russia invaded Ukraine that it would sell its 19.75% stake in the Russian state-owned company Rosneft, resulting in a loss of 25.5 billion euros. The French bank Soci?t? G?n?rale sold Rosbank and its insurance company in April last year to Vladimir Potanin, a Russian steel magnate close to President Vladimir Putin, incurring a loss of 3.1 billion euros in the process.

Companies that devised exit strategies late suffered even greater damage. As the war prolonged, Russia blocked foreign companies' withdrawals and sought to cover depleted finances through asset seizures and forced nationalization. German energy company Wintershall had 2 billion euros seized from its bank accounts by the Russian government in January this year. German energy company Uniper and Finnish company Fortum were effectively forcibly nationalized by Russia in April, suffering losses of 5.7 billion euros and 5.3 billion euros, respectively.

The fact that losses for Western companies are expected to expand further is problematic. Russia, which had been blocking foreign companies' withdrawals, secretly passed a bill in June allowing the seizure of Western companies' assets or their purchase at bargain prices so that Russia can profit by reselling them. This effectively seals off exit strategies for foreign companies entirely.

Nabi Abdullaev, a partner at consulting firm Control Risks, said, "Companies have lost a lot of money by leaving Russia, but those remaining are now at risk of much greater losses. For companies deciding what to do at the start of the war, the best strategy is to cut and run. The sooner they leave, the smaller the losses."

This content was produced with the assistance of AI translation services.