Visa and Mastercard are the latest Western companies to cut off or curtail their business activities in Russia following punishing sanctions that have sent the Russian economy into freefall.
The two payment network giants said on Monday they had blocked multiple Russian financial institutions from their network, complying with government sanctions imposed over Moscow’s invasion of Ukraine.
It meant that many Russians awoke on Tuesday unable to use some of their credit or debit cards, confirming fears that had led to huge bank runs over the weekend as everyday Russians rushed to withdraw cash.
Queues of people snaked through Moscow shopping malls again on Tuesday as the scramble for hard currency continued.
Some Moscow residents waited for hours, only to find that automatic tellers were empty or carried only rubles, which hit a record low on international exchanges on Monday before recovering slightly.
Russian assets continued their freefall on Tuesday with the Ishares MSCI Russia ETF dropping 50 percent in the past week and Russia’s biggest lender, Sberbank, plunging 85 percent since the invasion as investors raced for the exit.
Russia said on Tuesday it was placing temporary curbs on foreigners seeking to exit Russian assets, attempting to put the brakes on an accelerating investor exodus.
An increasing number of Western companies are voluntarily pulling out of Russia, with movie studios suspending releases, energy firms divesting, and sports bodies cancelling competitions.
A passenger uses a mobile phone to pay a fare at a Moscow Metro station on Tuesday. Passengers fare payments with Apple Pay, Google Pay, and Samsung Pay working with Visa and Mastercard were declined amid the sanctions imposed on Russia’s VTB Bank
Russians rushed to ATMs and waited in long queues on Sunday and Monday amid concerns that bank cards may cease to function, or that banks would limit cash withdrawals
Ukrainian soldiers handle equipment from a damaged military vehicle after fighting in Kharkiv, Ukraine on Sunday. An increasing number of Western companies are voluntarily pulling out of Russia over the unprovoked invasion of Ukraine
On Saturday, the U.S., Britain, Europe and Canada announced new sanctions on Russia – including blocking certain lenders’ access to the SWIFT international payment system.
Russians rushed to ATMs and waited in long queues on Sunday and Monday amid concerns that bank cards may cease to function, or that banks would limit cash withdrawals.
Since Vladimir Putin launched Moscow’s military campaign on Thursday, Russians have begun bracing themselves for worsening living standards.
Already hit by high inflation, they fear prices will rise further and have already seen interest rates more than double as the central bank tries to shore up the local currency.
Russia calls its unprovoked invasion Ukraine a ‘special operation’ to remove the ‘neo-Nazis and drug addicts’ that it claims lead the smaller country.
Key financial firms suspend business in Russia
Visa said on Monday it was taking prompt action to ensure compliance with applicable sanctions, adding that it will donate $2 million for humanitarian aid. Mastercard also promised to contribute $2 million.
‘We will continue to work with regulators in the days ahead to abide fully by our compliance obligations as they evolve,’ Mastercard said in a separate statement late on Monday.
The government sanctions require Visa to suspend access to its network for entities listed as Specially Designated Nationals, a source familiar with the matter told Reuters.
It means that clients at three of Russia’s 10 largest banks – VTB, private lender Sovcombank and central-bank-owned Otkritie – can no longer pay with ApplePay and GooglePay services.
That has created problems for metro users in Moscow, forcing commuters to buy one of the transport system’s Troika cards, use a plastic card or sign up to the city’s facial recognition Face Pay system instead.
The United States has added various Russian financial firms to the list, including the country’s central bank and second-largest lender VTB.
A man walks past a digital board showing Russian rouble exchange rates against the euro and the US dollar outside a currency exchange office in Moscow on Tuesday
A person holds cash withdrawn from an ATM machine at a Sberbank branch in Moscow
Global bank HSBC is also beginning to wind down relations with a host of Russian banks including the second-largest, VTB.
The bank has little direct exposure in Russia, with around 200 employees and annual revenues of $15 million in the country, against its global income of $50 billion.
Nordic lender Nordea said it had suspended trading in investment funds heavily exposed to Russia
Major money managers, including hedge fund Man Group and British asset manager abrdn, have been cutting their positions in Russia even as the rouble slumped to a record low and trading froze on its bonds.
‘There is certainly a willingness from asset managers and benchmark providers to get rid of Russia exposure in their portfolios and indexes,’ said Kaspar Hense, a senior portfolio manager at Bluebay Asset Management in London.
‘The big question is where do buyers turn up?’
Austria’s Raiffeisen Bank International is also looking into leaving Russia, two people with knowledge of the matter told Reuters, a move that would make it the first European bank to do so since the country’s invasion of Ukraine.
India’s top lender will not process any transactions involving Russian entities subject to international sanctions imposed on Russia after its invasion of Ukraine, according to a letter seen by Reuters and people familiar with the matter.
People stand in line to withdraw U.S. dollars and Euros from an ATM in St. Petersburg, Russia, on Friday. Ordinary Russians faced the prospect of higher prices and crimped foreign travel as Western sanctions over the invasion of Ukraine sent the ruble plummeting
Russian Prime Minister Mikhail Mishustin on Tuesday announced the country will temporarily stop foreign investors from selling Russian assets to ensure they take a considered decision, but did not give details.
Moscow’s move to impose capital controls mean that billions of dollars worth of securities held by foreigners in Russia are at risk of being trapped.
British asset manager Liontrust has suspended dealing in its Russia fund, while the prices of some of the most popular Russia-focused exchange traded funds were trading at a discount to their net asset values.
Ratings agency Fitch has identified 11 Russia-focused funds which have been suspended, with total assets under management of 4.4 billion euros ($4.92 billion) at end-January, a spokesperson said by email.
Energy firms including Shell and BP sever ties
BP is abandoning its 19.75 percent stake in Russian oil giant Rosneft.
Shell said it would exit all its Russian operations, including the flagship Sakhalin 2 LNG plant in which it holds a 27.5 percent stake, and which is 50 percent owned and operated by Gazprom.
France’s TotalEnergies said it would no longer provide capital for new projects in Russia.
Shell said it would exit all its Russian operations, including the flagship Sakhalin 2 LNG plant in which it holds a 27.5 percent stake (file photo)
Norwegian energy group Equinor will start the process of divesting from its joint ventures in Russia.
The company has been present in Russia for over 30 years, and in 2012 agreed to a strategic cooperation with Rosneft.
Denmark’s Orsted has stopped sourcing Russian coal and biomass for its power plants but will continue to buy up to two billion cubic metres of natural gas from Gazprom per year under a long-term contract.
Orsted also said it was not entering into new contracts with companies or using suppliers from Russia.
Shipping firms halt deliveries, leaving Russia isolated
U.S.-based United Parcel Service and FedEx, two of the world’s largest logistics companies, have said they are halting delivery services to Russia and Ukraine.
Container shipping company Ocean Network Express on Monday suspended bookings to and from Russia.
U.S.-based United Parcel Service and FedEx, two of the world’s largest logistics companies, have said they are halting delivery services to Russia (file photo)
Some of the companies cutting ties with Russia
Shipping group Maersk will temporarily halt all container shipping to and from Russia in response to Western sanctions on Moscow.
Maersk operates container shipping routes to St. Petersburg and Kaliningrad in the Baltic Sea, Novorossiysk in the Black Sea, and Vladivostok and Vostochny on Russia’s east coast.
Deutsche Post announced it had stopped DHL deliveries to Russia.
German shipping company Hapag Lloyd said it had issued a temporary suspension on bookings for Russia and halted sailings for Ukraine.
Shipping company MSC has stopped cargo bookings to and from Russian but will still accept and screen food and humanitarian cargoes.
Automakers halt production and sales in Russia
General Motors said it would suspend all vehicle exports to Russia until further notice.
The Detroit company does not have plants in Russia, only sells about 3,000 vehicles annually there and has limited supply-chain exposure.
Motorcycle maker Harley-Davidson said it had suspended its business and shipments of its bikes to Russia.
Daimler Truck said it would freeze its business activities in Russia with immediate effect, including its cooperation with Russian truck maker Kamaz.
Its pre-spinoff parent company, Mercedes-Benz Group , is looking into legal options to divest its 15 percent stake in Kamaz as quickly as possible.
Sweden’s Volvo Cars said it would suspend car shipments to the Russian market until further notice. Volvo sold around 9,000 cars in Russia in 2021, based on industry data.
Vladimir Putin (second from left) rides a Harley Davidson Lehman Trike in 2010. Harley-Davidson said it had suspended its business and shipments of its bikes to Russia
Japan’s Mitsubishi Motors said it may suspend production and sale of its cars in Russia as economic sanctions could trigger supply chain disruptions.
French carmaker Renault will suspend some operations at its car assembly plants in Russia next week due to logistics bottlenecks.
Renault is among the Western companies most exposed to Russia, where it makes 8 percent of its core earnings, according to Citibank. It also controls Avtovaz, Russia’s biggest carmaker.
Luxury carmaker Jaguar Land Rover (JLR) also paused the delivery of vehicles to Russia.
Entertainment companies and sporting bodies pull out
Hollywood studios Disney, Warner Bros, and Sony Pictures Entertainment said they would pause theatrical releases of upcoming films in Russia.
Warner Bros. announced on Monday that it was cancelling its Russian release of The Batman originally slated for March 2, due to Russia’s invasion of Ukraine.
Warner Bros.’ statement read, ‘In light of the humanitarian crisis in Ukraine, WarnerMedia is pausing the release of its feature film The Batman in Russia.
‘We will continue to monitor the situation as it evolves. We hope for a swift and peaceful resolution to this tragedy,’ the Warner statement concluded.
The Walt Disney Company also issued a statement revealing they are cancelling all of their upcoming theatrical releases in Russia, including the upcoming Turning Red, originally slated for release in Russia on March 10.
Canceled: Warner Bros. announced on Monday that it was cancelling its Russian release of The Batman originally slated for March 2, due to Russia’s invasion of Ukraine
Disney released a statement on Monday afternoon, which read, ‘Given the unprovoked invasion of Ukraine and the tragic humanitarian crisis, we are pausing the release of theatrical films in Russia, including the upcoming Turning Red from Pixar.’
‘We will make future business decisions based on the evolving situation. In the meantime, given the scale of the emerging refugee crisis, we are working with our NGO partners to provide urgent aid and other humanitarian assistance to refugees,’ the Disney statement concluded.
Sony Pictures also issued a statement that it was cancelling Morbius’ release in Russia, originally slated for March 24, along with other future releases.
Sony’s statement began, ‘Given the ongoing military action in Ukraine and the resulting uncertainty and humanitarian crisis unfolding in that region, we will be pausing our planned theatrical releases in Russia, including the upcoming release of Morbius.’
As well, Russia is facing pariah status in the sporting world because of their invasion of Ukraine after being ostracized by several high-profile federations.
FIFA and UEFA have expelled Russian clubs and national sides from all competitions after the International Olympic Committee’s call to implement a total ban
FIFA and UEFA have expelled Russian clubs and national sides from all competitions after the International Olympic Committee’s call to implement a total ban on the country as well as Belarus, who have supported the invasion.
This season’s Champions League final due to be held in St Petersburg on May 28 has been switched to Paris while Spartak Moscow have been thrown out of the Europa League.
Of far greater significance is Russia’s almost certain absence from the 2022 World Cup – they staged the event four years ago – as their qualifying semi-final play-off will not go ahead while their women’s team are banned from Euro 2022.
Other sectors: Companies from Uber to Adidas seek exit
Uber is speeding up its work disentangling itself from a Russian partner, the company said on Monday.
Uber in July 2017 announced that it was forming a partnership with the Russian company Yandex, an online giant to rival Google that offers search engines, music streaming, emails, advertising and autonomous cars.
At the time, Yandex was one of Russia’s most successful internet enterprises, accounting for some 65 percent of all searches and operating popular map and public transit apps.
The deal, which went into effect in 2018, was valued at about $3.7 billion.
Meanwhile, Finnish tire maker Nokian Tyres is shifting production of some of its key product lines from Russia to Finland and the United States.
A taxi operated by Uber, through their joint venture with Yandex, is seen on the streets of Moscow on February 23. On Monday Uber announced they were ‘accelerating’ moves begun last year to end their partnership with the Russian firm
Nokian produces approximately 80 percent of its annual capacity of 20 million tires in Russia, where it employs around 1,600 people, a company spokesperson said.
Finnish chemical company Kemira discontinued deliveries to Russia and Belarus from March 1 until further notice.
Laptop maker Dell Technologies Inc said it had suspended product sales in Ukraine and Russia.
German sportswear company Adidas has suspended its partnership with the Russian Football Union (RFS) with immediate effect.
Swedish telecom equipment maker Ericsson is suspending its deliveries to Russia as it assesses the potential impact of sanctions on its business there.
Nokia will stop deliveries to Russia to comply with sanctions. It supplies MTS, Vimpelcom, Megafon and Tele2 in Russia.
Swedish engineering group Sandvik is suspending its operations in Russia.
Sandvik generated around 3.5 percent of its 2021 revenue in Russia. The group has no production in the country but about 900 employees in sales and services.
The world’s biggest aircraft leasing company AerCap Holdings , headquartered in Dublin, will cease leasing activity with Russian airlines.
The company says about 5 percent of its fleet by net book value was on lease to Russian airlines at the end of 2021.