- July 4, 2022
- Posted by: admin
- Category: News
Disclaimer: At the beginning of the Russian invasion of Ukraine KSE Institute launched an analytical project, which was named “SelfSanctions”, aimed to collect data on foreign companies operating in the Russian market and limiting or terminating their activities. Examination of data was conducted jointly with specialists from the Ministry of Economy, the Ministry of Foreign Affairs and the Ministry of Digital Transformation of Ukraine. The database contains a lot of information, we collect daily statistics on changes in the status of foreign companies operating/operated in the Russian market and limiting or terminating their activities. Also, we created the Telegram bot https://t.me/exit_ru_bot for tracking/monitoring of news on priority foreign companies (coverage 1, 2, 3 or 7 days of monitoring). Also, we do regular analysis of changes in share prices and capitalization of parent groups of companies that have or have had business in Russia.
KSE database is partly based on the Yale’s School of Management database, epravda.com.ua, squeezingputin.com, leave-russia.org websites and other open sources. Data is verified and KSE status is assigned. Data on stocks is taken from Google and Yahoo Finance. At the same time, the KSE database is more complete and comprehensive and contains 40 percent more information than most other similar databases, as it also includes data on number of staff, revenue, capital and other financial indicators, the latest updates and changes in statuses, links to used sources, and daily updates from the telegram-bot etc.
KSE Institute is glad to announce that we are in the process of merging with project leave-russia.org which was developed by a team of volunteers.
KSE DATABASE SNAPSHOT as of 03.07.2022
Number of the companies that continue Russian operations (KSE’s status “stay”¹ ) – 705 (+33 per week²)
Number of the companies that have reduced current operations and hold off new Investments (KSE’s status “wait”) – 464 (0 per week)
Number of the companies that have curtailed Russian operations (KSE’s status “leave”) – 1 155 (+64 per week)
As of July 03, we have identified about 2,324 companies, organizations and their brands from 76 countries and 56 industries and analyzed their position on the Russian market. About half of them are public ones, for ~ 800³ public groups of companies, we also identified (where it was possible) their operating business in Russia (the presence of a controlling stake in a legal entity), which allowed us to calculate the value of capital invested in the country (about $116.7 billion), local revenue (about $228.3 billion), as well as staff (about 0.85 million people). 1,619 foreign companies have reduced, suspended or ceased operations in Russia.
As can be seen from the tables below, As of July 03, companies that declared a complete withdrawal from Russia had $44.3bn in revenues and $24.8bn in capital; companies that suspended their operations on the Russian market had yearly revenue of $61.0bn and $33.3bn in capital. TOP-70 companies-the largest taxpayers paid ~ $20,2bn of taxes annually – haven’t completely withdrawn yet, although suspended or scaled back.
If since the beginning of the Russian invasion of Ukraine, the percentage of companies that closed operations in Russia has risen sharply by mid-March, in the last month the ratio of those who leave or stay is virtually unchanged. although we still see a periodic increase in the share of those companies that remain in the Russian market. However, about a half (49.7%) of foreign companies have already announced their withdrawal from the Russian market, but another 30.3% are still remaining in the country.
The actions of companies by sector (based on the KSE database, with at least 20 companies representing the industry or country) are shown in the graphs below.
Decisions of Western companies by country and sector:
WEEKLY FOCUS. GOLD MINING IN RUSSIA
UK, US, Japan and Canada will ban Russian gold imports. The United States has already imposed sanctions. The European Union is working on a new plan to ban imports of Russian gold. Boris Jonson wrote on Twitter that it “will directly hit Russian oligarchs and strike at the heart of Putin’s war machine.”
346 tons of gold were produced in Russia in 2021 (excluding Gold Concentrates), making Russia the 2nd (after China) the world’s largest gold producer with a share of about 9.5%.
Gold production in Russia is consolidated, although not as strong as oil and gas or steel production. TOP-10 manufacturing companies account for 61% of the market⁵. In total, gold production is carried out by about 520 companies.
The most significant part of the gold produced in Russia is exported – 302 t in 2021 (87% of production). Russia mainly exported gold to the UK (266 t, 88% of exports) , the world’s largest gold hub. Some of the gold was shipped to Switzerland, the second-largest hub in the gold market. Deliveries to other countries were small as EU countries did not buy gold bars directly from Russia.
Russian export of gold has been severely limited since March. The London Stock Exchange no longer accepts Russian precious metals as the London Bullion Market Association (LBMA) suspended the Good Delivery status for all six accredited Russian refineries producing gold bars on March 7⁶.
Kinross Gold, the largest international gold mining company in Russia, has left the country
The largest gold mining companies in Russia are primarily Russian companies with one exception. In the 2000nds, international companies had been showing interest in Russian gold resources; however, most of them left in 2015. The imposition of sanctions, decline in gold prices, poor investor relations, non-transparent corporate governance have stopped investors⁷.
The largest company that remained in Russia was the Canadian Kinross Gold Corporation, the third-largest miner in Russia. Kinross announced its intention to leave the country in early April 2022 and completed the sale 100% of its Russian assets to the Highland Gold Mining group by June 15th⁸. The Sub-commission on the Control of Foreign Investments approved this transaction for a purchase price not exceeding $340 million. This is a substantial underpricing given that before the invasion of Ukraine, the value of KGC assets in Russia was estimated by investment banks at $1.5-2 bn .
There are still ways for Russia to sell gold
Russian gold miners can sell the metal to the Bank of Russia. The Central Bank of Russia has returned to buying gold on the domestic market since February 28, 2022. Russia can also export gold to countries that do not impose sanctions, including India and China, though It may require significant discounts⁹.
Meanwhile, according to data from the Swiss Federal Customs Administration, Switzerland imported more than 3 tons of gold from Russia in May for the first time since the invasion of Ukraine¹⁰.
This particular event shows that even though Russian exports of gold almost sank to zero since March 2022, introducing sanctions is essential. At the same time, export opportunities still remain and hitting Russian gold exports may require more effort.
