Norwegian oil group Equinor and Germany’s Daimler Truck are ending their partnerships with Russian businesses while Volvo and Jaguar Land Rover said they were halting deliveries of cars to the country as the corporate fallout from the invasion of Ukraine spreads.
The announcements came as multinational groups with operations in Russia grappled with the reputational impact of their association with the country as well as potential exposure to western sanctions designed to inflict severe economic pain.
They follow BP’s announcement on Sunday that it was divesting its near-20 per cent stake in Russian state oil group Rosneft, with chair Helge Lund describing Moscow’s invasion of Ukraine as an “act of aggression which is having tragic consequences across the region”.
Companies with staff in Russia are also considering whether to repatriate their families, people close to two French groups with operations in the country said.
Equinor on Monday said it was “exiting” joint ventures in Russia that include a strategic partnership with Rosneft encompassing projects throughout Siberia.
“In the current situation, we regard our position as untenable,” said Anders Opedal, chief executive. “We will now stop new investments into our Russian business and we will start the process of exiting our joint ventures in a manner that is consistent with our values.”
He said Equinor, which is two-thirds owned by the Norwegian government, was “deeply troubled” by Russia’s invasion.
Daimler Truck, the world’s largest truckmaker, said it had taken the decision to “immediately suspend all our business activities in Russia” even though its contract with local vehicle maker Kamaz limits co-operation to manufacturing civilian vehicles. Kamaz, which was established under the Soviet Union, separately makes utility vehicles for Russia’s armed forces.
Volvo Cars specifically cited the impact of the west’s financial penalties as it said it would “not deliver any cars to the Russian market until further notice” because of “potential risks associated with trading material with Russia, including the sanctions imposed by the EU and US”.
Truckmaker Volvo, which is independent of the car company, said on Monday it had halted production at its factory in Russia and stopped sales to the country until further notice, citing the risk of sanctions.
Jaguar Land Rover on Monday evening said it was pausing the delivery of vehicles into the Russian market because of “trading challenges”, while carmaker BMW said its “business activities in Russia are under review”, with a decision expected on Tuesday.
ZF, a major German parts supplier, also said it has frozen all deliveries to Russia, including those to the ZF Kama joint venture, while it investigates the impact of the international sanctions.
Following warnings from other carmakers that they could struggle to transport components into and out of Russia, Renault said it had temporarily closed its Moscow plant, which produces models such as the Renault Captur and its Arkana SUVs, because of supply chain problems.
Another of the French group’s factories operated by its Russian Avtovaz business also halted production on Monday, but that was because of semiconductor shortages, the company said, with manufacturing there due to resume on Tuesday.
Russia is the Renault group’s second-biggest market by sales volumes, while Avtovaz last year made up about 7 per cent of its overall revenues.
Many of the western companies employ largely local staff through their Russian subsidiaries.
Major employers also include retailers such as Germany’s Metro AG or France’s Auchan. The French supermarket chain, with 30,000 workers in Russia, said it was “anticipating everything we can” as it also tries to grapple with any fallout for its staff. Western sanctions sent the rouble tumbling on Monday.
Equinor said it expected to take impairments related to the ventures. The company has been in Russia for more than 30 years and expanded its partnership with Rosneft in 2020, paying $550mn to gain a 49 per cent stake in a dozen exploration and production licences in eastern Siberia.
Equinor’s current production in Russia is modest at just 25,000 barrels of oil equivalent a day versus its group total of about 2mn barrels a day. It has 70 employees in Russia.
Norway’s government on Sunday ordered its $1.3tn oil fund, the world’s largest sovereign wealth fund, to ditch its $3bn in Russian investments.
Daimler Truck’s move is unlikely to have a large impact on its profits as the truckmaker sells just a few thousand units in Russia each year.
Mercedes-Benz AG, which in its previous guise as Daimler AG was the parent company of Daimler Truck, said it was also seeking to divest a 15 per cent stake in Kamaz.
Additional reporting by Antoni Slodkowski in Tokyo, Leila Abboud in Paris, Olaf Storbeck in Frankfurt and Steff Chavez in Chicago
