In the early days of Russia’s onslaught on Ukraine, European companies lost over $100 billion. As the war started in Ukraine, maximum uncertainty hit European companies who were doing businesses in Russia as nobody knew where it will end.
All investors in the world fear uncertainty and the war in Ukraine brought maximum uncertainty environment for investors where they were not sure what was going to happen in the future when it comes to Russia’s relations with Europe and they were also not sure when the war will end in Ukraine.
When the war in Ukraine began, some panic kicked in among investors, so western companies with businesses exposed to Russia lost more than 100 billion dollars in market value in the first week of Russia’s military operation in Ukraine as war risks surged.
Many investors were still uncertain about the full impact of western sanctions imposed on Russia which means few of them were willing to take chances.
From gold miner Polymetal International Inc to tire maker Nokian Renkaat Oyj and Austria’s Raiffeisen Bank International, the selloff of European companies with Russia exposure was severe. Some stocks lost three-quarters of value since February 24 when Russia’s military started what president Putin of Russia called a special military operation in Ukraine.
When Russia’s military operation in Ukraine started to hold, popular names such as Renault SA and Wizz Air Holdings Plc had their stock shares fall by 20%. A total of more than 100 billion dollars were wiped out of the value of the 22 Stoxx Europe 600 companies that get more than 5% of their sales in Russia.
The London stock exchange also suspended trading in dozens of depositary receipts for Russian companies in connection with the ongoing war in Ukraine, in the light of market conditions and the need to maintain orderly markets.
The impact of European equities from the Ukraine war was severe as oil giants like Bp Plc and Shell Plc announced that they will walk away from Russia, reversing three decades of investments following the collapse of the Soviet Union in 1991.
The Truck Holding AG, one of the top commercial vehicle makers, announced that it will stop its business activities in the country until further notice and may review ties with local joint venture partner Kamaz PJSC.
In order for investors to shun exposure to geopolitical risks, Russian assets will get the status of being non-ESG complaints according to Garnry who highlighted popular environmental, social and governance-focused investment styles putting more pressure on others.
The most affected sector in the selloff in the European sector was banks. The Stoxx 600 Banks Index dropped nearly 20% since its peak on February 10, flirting with the bear market territory. Raiffeisen was the worst performer by far as it lost half of its market value.
The Austrian Lender which had 16 billion dollars of outstanding loans in Russia and Ukraine at the end of last year, said that it was halting its dividend for 2021 but insisted that it had no plans to walk away from its businesses in the region.
Ukraine war come at a time when Europe was in the middle of a regime shift characterized by unprecedented inflationary forces not seen in five decades and soaring commodity prices which has exacerbated the situation.
Before the Ukraine war happened, I had warned about the consequences of the war between Russia and Ukraine on Europe’s economy but sometimes leaders tend to lean on sides of politics for short-term gains which usually affects businesses and causes chaos in the markets.
When the war started in Ukraine, it was inevitable that European companies with business exposure to Russia and Ukraine were going to suffer as investors fled with the money running away from uncertainty in Europe to US and Asia which they deemed to be a safe haven for their assets.
Investors fear insecurities and uncertainty which is what we have in Europe right now after together with the US, Australia, Singapore, and Japan, the EU imposed the toughest sanctions on Russia including the nuclear option of cutting some Russian banks from Swift banking system.
The situation remains unstable in Europe as gas prices skyrocketed when president Putin of Russia in retaliation for the sanctions imposed on Russia demanded that gas deliveries made to unfriendly countries which include the whole of Europe start paying in rubbles.
Of course, there’s going to be a showdown with Russia because of politics as European countries insist that Russia obeys the old agreement made where Russia’s oil and gas were to be paid in either Euros or US dollars but the problem is that Russia didn’t start this chaos of sanctions, Europe and its allies did.
It’s interesting to hear some European leaders talk about responsibilities and morals which they think Russia has to respect but forget that they never considered such behaviors or obligations when they applied sanctions on Russia and they want Russia to respect them now because it’s in their interests which I don’t think Putin will agree with unless a compromise is reached.
Europe depends on Russia’s gas for about 45% of the total supply and it will cause a crisis like never seen before if disagreements between Russia and Europe continue and Russia decides to cut its gas deliveries to Europe.
Gas prices will shoot up beyond recognition and many businesses will shut causing Chaos and inflation like never seen before in Europe.