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Business

Western companies rethinking Russia

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Unrest is mounting in eastern Ukraine.   © Reuters

LONDON/NEW YORK -- Exxon Mobil and Ford are part of a growing list of Western multinationals halting or scaling down operations in Russia and Ukraine as Moscow's standoff with the West over the former Soviet republic drags on.

     Exxon's plans to develop the Skifska gas field in the Black Sea are "on hold due to current circumstances," Senior Vice President Andrew Swiger said at a presentation for analysts. The block sits off the Crimean Peninsula, now under Russian control.

     Exxon also has investments in Russia, where it is partnering with Rosneft, the state-owned oil giant, in the Arctic and elsewhere.

     Last year, fellow oil major Shell landed a $10 billion shale gas development project in Ukraine. The outlook for both companies' Ukrainian interests has become much harder to read.

     Ford's joint venture with Russian automaker Sollers will cut 700 jobs, just over a tenth of the workforce at one of its plants, according to a Reuters report. The decision was blamed partly on weak sales of compact cars, but the Ukrainian situation is dimming hopes for a big recovery in demand.

     Meanwhile, German companies doing business in Russia have taken a hit from the falling ruble. Retail group Metro has postponed a partial listing of its Russian wholesale business. Generic-drug maker Stada Arzneimittel, which draws 20% of its revenue from Russia, lowered its earnings forecasts, citing uncertainty over the Ukrainian situation.

     So far, Western countries have gone only as far as imposing travel bans and asset freezes on senior officials in connection with Russia's intervention in the Ukraine. Additional sanctions would have a greater impact, says Jan Randolph, director of sovereign risk at IHS Global Insight.

     But not all companies are equally willing to isolate Russia. The Germans are particularly keen on doing business there. BMW's head of finance, Friedrich Eichiner, recently described the country as a promising market. Siemens President Joe Kaeser told Russian leader Vladimir Putin last month that the industrial group remained interested in long-term investment.

     Japanese companies are biding their time. Asahi Glass, which books nearly 5% of its sales in Russia, says it has no plans to scale back operations there.

     Japan Tobacco says the crisis has not affected its offices or factories in Russia, where it ranks as the brand leader in the cigarette market. But a weak ruble could erode its Russian earnings. The currency has softened to more than 35 to the dollar, compared with last year's average of 31.8.

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