The corporate fallout from Russia’s invasion of Ukraine

Russia’s invasion of Ukraine risks disrupting the export of critical commodities and rupturing supply chains, experts have warned, as multinational companies with operations in the region brace for the fallout.

An interruption of Russian exports would hit a wide range of industries, from fertiliser makers to food, automotive and aircraft manufacturers.

Although Russia is best known as a big exporter of oil and gas, along with Ukraine, it is also a leading supplier of grains to the world. The two countries account for just under a third of the world’s wheat exports.

The country is also an important source of metals used in manufacturing such as nickel, titanium, palladium and aluminium. Titanium is needed by aircraft and aero-engine manufacturers such as Boeing, Airbus and Rolls-Royce, while palladium is used in catalytic converters, electrodes and electronics.

Michael Every, global strategist at Rabobank, said that a combination of a prolonged conflict and tough sanctions could deliver the “same kind of shock as we had during Covid, when we rapidly found out that this elegant, concentrated, just in time structure we had built up is flawed”. 

The Financial Times contacted a range of companies dependent on supplies from Russia or with operations in the country. They all said they were monitoring the situation and prioritising the safety of employees. Several said they were protected from disruption in the short term, in part due to localised operations or higher stock levels of crucial materials.

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Energy and mining

The energy industry was bracing for disruption after European gas futures jumped 50 per cent to €126 per megawatt hour, while oil climbed as much as 8 per cent, hitting the highest level since 2014.

There is no evidence yet of disruption to supply, but with limited spare capacity to replace Russian oil or gas if flows falter, either due to sanctions or the conflict, price are expected to climb.

BP and TotalEnergies are the European oil producers with the highest exposure to Russia, according to investment bank Jefferies. BP owns almost 20 per cent of Rosneft, one of Russia’s largest oil producers. Last year, the stake generated profits of more than $2.4bn for BP from which it collected a dividend of $640mn.

Oil pumping jacks in a Rosneft oilfield in the Udmurt Republic © Andrey Rudakov/Bloomberg

Russia is the world’s third-largest oil producer, pumping approximately 10mn barrels per day of crude. Trafigura, one of the world’s biggest commodity traders, said that Russian crude was already trading at a discount in a sign that buyers had started to avoid Russian cargoes.

Giacomo Romeo, an analyst at Jefferies, said that one potential scenario was that Ukrainian pipelines would be damaged or Russia would halt the flow of gas through the country, which represented about 8 per cent of total exports to Europe last year. The soaring gas price is set to raise energy costs further for industrial consumers across Europe, which depends on Russia for roughly 40 per cent of its supply.

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As Russia is also an important source of raw materials used in manufacturing, a sector where companies are braced for a rise in costs and potential interruption of supplies. Excluding China, Russia accounts for 14 per cent of the world’s aluminium production.

Aluminium is used in everything from drinks cans to cars. Russia is a big producer of platinum and palladium, two precious metals that are used to remove toxic emissions from vehicle exhaust fumes.

The financial strain inflicted by high gas prices, which jumped 30 per cent on Thursday, has already forced several big metal producers to curb output and mothball smelters.

“The risk of a disruption in Russian platinum group supply is immense, with the country accounting for 12 per cent of global platinum mine supply and 40 per cent of global palladium supply,” said Natasha Kaneva, an analyst at JPMorgan.

Ukraine-based Ferrexpo is the world’s third-largest exporter of high-grade iron ore pellets. The London-listed company said its mining and processing facilities, which are located in central Ukraine, were operating as normal although the government had suspended rail transportation. The group’s shares plunged 42.5 per cent on Thursday, making it the biggest faller on the FTSE 250.

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Russia and Ukraine are key sources of chemical gases C4F6 and neon that are vital to semiconductor production. Chip manufacturers could be among the most badly affected if supplies from Ukraine are severely hampered for an extended period. Ukraine is one of the largest supplies of a number of noble gases used in chip making, particularly the neon used in lasers that etch features on to chips.

A handful of Ukrainian companies process neon that is a byproduct of steel production in Russia. Richard Betzendahl, an independent consultant specialising in rare gases, said that Ukraine produces a quarter of the world’s neon, the prices of which have tripled in the last six months after Chinese steel mills that produce the gas as a byproduct shut down for the winter Olympics. Undersupply of xenon and krypton, also critical to semiconductor manufacturing, would deepen, he added.

“It definitely is going to cause problems for semiconductor companies,” he said.

Some of the largest chipmakers claimed their global supply chains were designed to withstand the sort of disruption that could come from an extended armed conflict.

Micron, one of the largest memory chipmakers, said its neon is “primarily sourced and originates from various suppliers” in other countries. It also said it was working with suppliers under long-term contracts to make sure it did not face shortages, and that it had “appropriate inventories” to keep operating.

Intel, the largest US chipmaker, also pointed to its “diverse, global supply chain”, adding: “We do not expect any impact to our supply chain.”

However, neither company would say what proportion of their neon supplies still come from Ukraine, or how long they could continue their normal manufacturing operations if supplies were disrupted.


Western banks have been in retreat from Russia since the Kremlin’s invasion of Crimea in 2014. However, shares in the European lenders that have remained were hit hard on Thursday.

Raiffeisen, the Austrian lender that generates more than a third of its profits in Russia, suffered a 20 per cent fall in its stock, while Italy’s UniCredit and France’s Société Générale each fell more than 11 per cent.

SocGen’s Moscow-based subsidiary, Rosbank, has 550 branches and 3.1mn customers, while UniCredit operates 103 branches and 2mn customers in the country. Last month UniCredit ditched a plan that could have seen it acquire Otkritie Bank, a Russian state-controlled lender.

A customer withdraws money at a Rosbank ATM in Moscow © Andrey Rudakov/Bloomberg

Russia accounted for 6 per cent of UniCredit’s profits last year and 4 per cent of SocGen’s, according to JPMorgan. Raiffeisen, SocGen and UniCredit are Russia’s ninth, 10th and 11th biggest banks in Russia by assets.

The three banks each said they were closely watching developments, but insisted their Russian businesses were sufficiently capitalised to deal with mass customer withdrawals and that they were continuing to operate in a “fully compliant manner”.

“Russia has gone through waves of sanctions and we have always adjusted our way of operating,” said UniCredit. SocGen said that “Rosbank is a Russian bank with mainly local activities and we are confident in our ability to ensure the activity for our clients and to adapt where necessary.”

Professional services

Law firms and consultancies with offices in Russia were drawing up contingency plans on Thursday for possible retaliation by Moscow to western sanctions.

Consultancies McKinsey & Company and Boston Consulting Group each have 400 people working in Moscow while the UK-headquartered magic circle law firms have about 150 lawyers in Russia in total.

Leaders at one large consulting firm were preparing for potential counter-sanctions by Russia against western companies, including a possible ban on them doing work in the country, said a person briefed on the matter. Another possibility was that staff or offices of these companies could become the targets of protests or civil disobedience in Russia, the person added.

Large international law firms with a base in Ukraine, including CMS, Dentons and Baker McKenzie, temporarily closed their Ukraine offices on Thursday morning and have been helping relocate staff to EU bases. Baker McKenzie, which claims on its website to have been the first global law firm to open in Ukraine, has 100 staff based in the region followed by CMS, which has 67 employees based in Kyiv.

Dentons has said it was relocating lawyers from Ukraine to other offices if requested.

Accounting and consulting firm PwC, which has three offices in Ukraine, said it was trying to keep its operations running “as normally as possible” but had advised its 750 staff in the country to stay at home on Thursday. Fellow accountant KPMG, which has 4,000 staff in Russia and 600 in Ukraine, said it “remains committed to maintaining its local presence”.

“It’s absolute unprecedented chaos behind the scenes getting people out,” said a person at another consulting firm.

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Car industry

Ukraine is home to factories that make car parts, leaving it connected to the supply chains for both the Russian and the broader European auto industry.

Mainstream international suppliers including Bosch and Aptiv have plants in the west of the country, along the border with Poland, which is a major automotive parts hub. The Bosch plant refurbishes components for the spare parts market, and does not supply car plants directly, a spokesman said on Thursday.

Many of the other factories specialise in electrical cables, which rely on cheap labour and are owned by companies that have similar operations in north Africa, according to Ian Henry, an automotive production specialist at AutoAnalysis.

A Lada Vesta car on the assembly line at the Izhevsk Automobile Plant in Russia © Andrey Rudakov/Bloomberg

“It is difficult to say currently how soon Ukraine will become the defining manufacturing issue rather than just another headache,” said Henry.

Palladium supply, which is used in catalytic converters and semiconductors, as well as nickel for batteries, is a concern. And the rising price of nickel, which is also sourced from Indonesia and the Philippines, had already led carmakers to look at alternative materials for their electric car batteries, according to Dominic Tribe, a supply chain specialist at the consultancy Vendigital.

Several carmakers also have factories in Russia itself, including Renault, Stellantis, Toyota, Kia and Nissan. Renault, which owns the country’s largest carmaker Avtovaz, has the most exposure. Its Russian subsidiary has two factories, and Renault has its own plant in Moscow. The French carmaker accounts for just under a third of the vehicles sold in the country.

Luca de Meo, chief executive, told the Financial Times last week that the company was drawing up contingency plans to keep parts flowing to the sites in the event of sanctions or disruption. Between 10 per cent to 20 per cent of parts that go to Avtovaz plants are imported, while for Renault’s Moscow facility the figure is between 30 per cent and 40 per cent.

Some of Renault’s Russian-based suppliers include France’s Valeo, which has a factory east of Moscow that makes some transmission systems and other parts. Valeo on Thursday said it was monitoring the situation.

Stellantis is the only car company with a base in Russia that exports a significant volume of vehicles to Europe. The Jeep and Fiat owner had planned to begin producing vans for export at Kaluga, about 120 miles south of Moscow, to meet growing demand.

Earlier this week Carlos Tavares, Stellantis chief executive, said the group could divert work back to Europe if it faces export bans or is unable to get parts for the factories.

“If we cannot supply the plants . . . we have either to transfer that production to other plants or just limit ourselves and increase the price,” he said.

Food producers

As one of the world’s leading producers of grains and sunflower oil, western grain traders, food companies and some brewers have operations in Ukraine. As Russian troops entered the country, several suspended operations.

Mondelez, the maker of Cadbury chocolate and Oreo cookies, said it was suspending operations at its two Ukrainian factories in Trostyanets and Vyshhorod, which make a range of products including local brands such as Jubilee biscuits and Korona chocolate.

Oreo biscuits during control checks on the production line at the Trostyanets confectionery plant, operated by Mondelez International, in Trostyanets, Ukraine © Vincent Mundy/Bloomberg

Carlsberg, the world’s third-largest brewer and maker of Kronenbourg 1664, said work at all three of its breweries in Ukraine had halted. “We have suspended the work at our breweries in Zaporizhzhya and Kyiv and have asked our employees to remain at home and follow the instructions from the authorities. Our third brewery in Lviv is temporarily closed due to disruption in the supply of natural gas,” the Danish group said.

Cargill, the US agricultural trading group that owns the majority of a grain terminal near Odesa on the Black Sea, said that “we are working to determine if there are disruptions or impacts to our operations in the region. We do have contingency plans in place because there is still a great deal of uncertainty.”

The US company had to abandon its sunflower crushing plant in Donetsk in 2014 after armed individuals took it over.

Nestlé, the world’s largest food company, has sent home its almost 5,800 staff in Ukraine, following other international food and drinks groups in suspending operations in the country following the Russian invasion.

The Swiss group said it had “temporarily closed” its three factories and service centre in Ukraine, recommending that employees stay at home and follow guidance from authorities. It said that as of Thursday afternoon “all our colleagues are safe and we remain in constant contact with them”.

Reporting by Emiko Terazono, Sarah White, Peter Campbell, Michael O’Dwyer, Kate Beioley, Neil Hume, Tom Wilson, Harry Dempsey, Judith Evans, Richard Waters and Sylvia Pfeifer

Video: Russia begins invasion of Ukraine

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