From Boeing Co to Mom-and-Pops: The Ripples from Crimea Spread

by on

Anyone trading extensively (or even in a limited fashion but for key components) with Russia is no doubt anxiously watching developments in Ukraine and the almost-daily ramping up of tensions on both sides, with threats of sanctions countering military posturing.

Reuters reports that both the ruble and Russian stocks are down sharply on Thursday and Friday of the week before last, respectively. This was largely as a result of comments by US President Barack Obama that Washington was considering sanctions against key economic sectors in Russia, including financial services, oil and gas, metals and mining and the defense industry, if Russia made military moves into eastern and southern Ukraine.

FREE Download: The Monthly MMI® Report – price trends for 10 metal markets.

Trade in goods between the two countries was worth $38.12 billion in 2013 and US firms have $14 billion in direct investment in the country. Firms from Boeing down to mom and pops regularly import metals and metal products from what is one of the world’s largest commodity exporters.

But US trade is dwarfed by the EU – even little Netherlands has more bilateral trade with Russia at €38 billion ($52 billion), second only to Germany which is estimated to have some 300,000 jobs and 6,000 companies with investments in the country. Exports to Russia totaled €36bn last year, with machinery, vehicles and vehicle parts together accounting for 40% of the total.

Imports from Russia of €40bn ($55bn) are admittedly dominated by gas and oil – standing at 83% of this figure – and neither country is going to realistically risk shutting that supply off. Germany relies on Russia for 38% of overall energy imports.

Not surprisingly, France, which had been leading the charge against Syria and was very supportive against Iran, is somewhat more reticent about imposing sanctions on Russia. This is possibly due to a €1.2bn ($1.7bn) contract to build two Mistral-class helicopter assault ships for the Russian navy, one of which is rather embarrassingly called the Sevastopol after Russia’s Crimean naval base.

The FT reports that France is the largest EU exporter to Russia after Germany and Italy, and the biggest foreign investor in the Russian financial sector, mainly through the ownership by Société Générale, the French bank, which in turn has majority ownership of Rosbank. The French retailer Auchan is the biggest foreign employer in Russia, carmaker Renault has a tie-up with Avtovaz and other investors include Total, the oil major, Alstom, the engineer, Danone, the dairy products group, and Axa, the insurer.

Brits, on the other hand, may welcome a reduction in rich Russians driving up the London property market, although financiers would miss the IPOs and corporate work resulting from major Russian firms listing in the City of London.

FREE Download: 7 Metal Buying Strategies for 2014 (Base Metals, HRC, CRC)

Continued in Part Two.

Leave a Comment

Your email address will not be published. Required fields are marked *