Global companies have incurred more than $59 billion in losses from their operations in Russia, as sanctions hit the economy, according to the newspaper.The Wall Street Journal“.
About 1,000 Western companies have pledged to exit or reduce their operations in Russia, following its invasion of Ukraine.
While the local economy has become weak following the number of buyers and investors has declined, the financial assets in those companies that were once valuable are now worthless.
And it became tired of those companies that are subject to American and international standards to bear additional fees related to the depreciation of their assets.
The writedowns (in the value of the asset) to date include a group of companies and institutions, such as banks, breweries, manufacturers, retailers, restaurants, shipping companies, and others.
McDonald’s, the giant, expects to post fees between $1.2 billion and $1.4 billion following agreeing to sell its Russian restaurants to a local license holder; Exxon Mobil Corp. paid more than $3.4 billion following it halted operations on an oil and gas project in Russia’s Far East.
Budweiser brewer Anheuser-Busch InBev SA paid a fee of $1.1 billion following it decided to sell its stake in a Russian joint venture.
“This round of declines is not the end of it,” Carla Nunes, managing director at risk advisory firm Kroll LLC, said, then continued, “As the crisis continues, we may see more financial fallout.”
Irish charter company AerCap Holdings Inc last month took a $2.7 billion fee, despite it writing off more than 100 of its planes stranded in the country.
The planes have been leased to Russian airlines, while other leasing companies are taking similar hits.
Other companies assume they will not realize any money from their operations in Russia, even before they finalize their exit plans.
The $25.5 billion fee for British oil giant BP Plc on its Russian holdings last month included writing off $13.5 billion of shares in oil producer Rosneft.
The company did not say how and when it plans to liquidate its Russian assets.
Even some companies that maintain a small presence in Russia write down their assets. French energy company Total Energy raised $4.1 billion in April on the value of its natural gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they should clearly disclose Russia-related losses, and that they should not adjust revenue to add estimated income lost due to the situation in Russia.
Bank of New York Mellon Corp., which said in March it had halted new banking in Russia, appeared to have violated that directive when it announced its results for the first three months of this year.
The bank reported $4 billion in revenue under a single measure that included an added $88 million to reflect income lost due to Russia.
Academic research indicates that investor reactions to cutbacks are mixed.
A recent study by the Yale School of Management, in Connecticut, found that financial markets “reward companies for leaving Russia”.
The researchers concluded that the stock price gains of the withdrawing companies “far exceeded the cost of asset depreciation for the companies that wrote down the value of their Russian assets.”
With sanctions weakening the Russian economy, companies operating there are still reassessing their future profits and tallying losses.
In May, Uber Technologies was hit by a $182 million drop in the value of its stake in a Russian taxi joint venture due to expectations of a prolonged recession in the Russian economy.
Uber said in February it was looking for opportunities to speed up the sale of its stake.
