Business Losses From Russia Top $59 Billion as Sanctions Hit
Nearly 1,000 Western companies plan to leave the country or cut back operations, with more write-downs expected
Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy and sales and shutdowns continue, according to a review of public statements and securities filings.
Almost 1,000 Western businesses have pledged to exit or cut back operations in Russia, following its invasion of Ukraine, according to Yale researchers.
Many are reassessing the reported value of those Russian businesses, as a weakening local economy and a lack of willing buyers render once-valuable assets worthless. Companies under U.S. and international reporting standards have to take impairment charges, or write-downs, when the value of an asset declines.
The write-downs to date span a range of industries, from banks and brewers to manufacturers, retailers, restaurants and shipping companies—even a wind-turbine maker and a forestry firm. The fast-food giant McDonald’s Corp. expects to record an accounting charge of $1.2 billion to $1.4 billion after agreeing to sell its Russian restaurants to a local licensee; Exxon Mobil Corp. took a $3.4 billion charge after halting operations at an oil and gas project in Russia’s Far East; Budweiser brewer Anheuser-Busch InBev SA took a $1.1 billion charge after deciding to sell its stake in a Russian joint venture.
“This round of impairments is not the end of it,” said Carla Nunes, a managing director at the risk-consulting firm Kroll LLC. “As the crisis continues, we could see more financial fallout, including indirect impact from the conflict.”
Some companies are writing off assets stranded in Russia. The Irish aircraft leasing company AerCap Holdings NV last month took an accounting charge of $2.7 billion, which included writing off the value of more than 100 of its planes that are stuck in the country. The aircraft were leased to Russian airlines. Other leasing companies are taking similar hits.
Other businesses are assuming that they will realize no money from their Russian operations, even before they have finalized exit plans. The British oil major BP PLC’s $25.5 billion accounting charge on its Russian holdings last month included writing off $13.5 billion of shares in the oil producer Rosneft. The company hasn’t said how or when it plans to divest its Russian assets.
Even some companies that are retaining a presence in Russia are writing down assets. The French energy giant TotalEnergies SE took a $4.1 billion charge in April on the value of its natural-gas reserves, citing the impact of Western sanctions targeting Russia.
The Securities and Exchange Commission last month told companies that they have to disclose Russian-related losses clearly, and that they shouldn’t adjust revenue to add back the estimated income that has been lost because of Russia.
Bank of New York Mellon Corp. , which in March said it had stopped new banking business in Russia, appeared to breach this guidance when it reported its results for the first three months of this year. The New York custody bank reported $4 billion in revenue under one measure that included $88 million added to reflect income lost because of Russia.
A BNY Mellon spokesman declined to comment.
Investors appear to have mixed reactions to the write-downs, partly because most multinationals have relatively small Russian exposure, academic research suggests.
Financial markets are “rewarding companies for leaving Russia,” a recent study by Yale School of Management found. The share-price gains for companies pulling out have “far surpassed the cost of one-time impairments for companies that have written down the value of their Russian assets,” the researchers concluded.
Research using a different methodology found a more subtle investor reaction. Analysis by Indiana University professor Vivek Astvansh and his co-authors of the short-term market impact of more than 200 corporate announcements revealed a marked trans-Atlantic divide. Investors punished U.S. companies for pulling out of Russia, and non-American companies for not withdrawing, the analysis found.
More write-downs and other Russia-related accounting charges are expected in the coming months, as companies complete their planned departures from the country.
British American Tobacco PLC, whose brands include Rothmans and Lucky Strike, said on March 11 it had “initiated the process to rapidly transfer our Russian business.” That transfer is still ongoing, according to a BAT spokeswoman. BAT hasn’t taken an impairment in relation to the business.
Accounting specialist Jack Ciesielski said companies might hold off announcing a write-down until they have a good handle on how big the loss will be.
“You don’t want to put a number out there until you’re confident that it’s not likely to change,” said Mr. Ciesielski, owner of investment research firm R.G. Associates Inc.
Many companies are giving investors rough estimates about what to expect on Russia-related losses.
The manufacturer ITT Inc., which has suspended its operations in Russia, said last month it expects a $60 million to $85 million hit to revenue this year because of a “significant reduction in sales” in the country. That is a small slice of the $2.8 billion in total revenue for the maker of specialty components for the auto, aerospace and energy industries.
As sanctions weaken the Russian economy, businesses still operating there are reassessing their future earnings and booking losses. Ride-sharing giant Uber Technologies Inc. in May took a $182 million impairment on the value of its stake in a Russian taxi joint-venture because of forecasts of a protracted recession in the Russian economy. Uber said in February it was looking for opportunities to accelerate its planned sale of the stake.
Former Nato chief calls for economic version of Article 5 defence pledge
Proposal is intended to counter commercial coercion by countries such as Russia and China
A former Nato chief is calling for the creation of an economic version of the Article 5 mutual defence pledge that defines the transatlantic military alliance in order to thwart commercial coercion by authoritarian states.
Anders Fogh Rasmussen, the former Danish prime minister who served as Nato secretary-general from 2009 to 2014, will on Friday announce a plan for western allies and other democracies to respond more effectively to economic threats from countries such as China and Russia.
“Our proposal is inspired by Nato’s Article 5, which states that a military attack on one ally is considered an attack on all,” Rasmussen wrote in a report co-authored with Ivo Daalder, former US ambassador to Nato. “The aim is to produce the same deterrence and solidarity in the economic realm among democracies that Nato produces in the security realm.
“It’s time to tell the bullies that if they poke one of us in the eye, we’ll all poke back,” they added.
The idea is being floated as western leaders prepare to gather this month in Spain for a Nato summit and in Germany for a G7 summit, where they will grapple with how best to confront economic warfare as well as traditional security threats.
The urgency of tackling economic aggression from authoritarian nations has risen in the wake of China’s commercial confrontations with Australia and Lithuania, as well as Russia’s weaponisation of its natural resources in the stand-off with the west over Ukraine.
Rasmussen and Daalder are proposing that an economic Article 5 commitment could be implemented through existing structures such as the G7, which has been reinvigorated along with Nato by the co-ordinated western response to the war in Ukraine. But the authors said other democracies would have to be “involved” and a standalone organisation may have to be set up to manage the new guarantee.
In an interview, Daalder said officials in US president Joe Biden’s administration had been consulted about the plan, including at the White House, Treasury and state departments, along with EU officials. While he acknowledged that as recently as last year such an idea would have been unlikely to go very far, he said the Russian invasion of Ukraine meant there was a greater understanding that “the world is changing”.
Although the report does not spell out specific retaliatory measures that could be imposed on countries that are deemed responsible for economic coercion, Daalder said these could include sanctions, secondary sanctions, import tariffs and other measures.
Even though such punitive actions could have negative economic spillovers on the countries imposing them and trigger a backlash from business, they might help concentrate supply chains in democracies, he said.
“There are geostrategic interests . . . that may have to trump economic interests in a way that wasn’t probably true in the last 30 years, but needs to be true in the next,” he added.
Loro Piana Presents Furniture Installation at New Headquarters
Raphael Navot's sculptural designs were unveiled nestled under an expansive and striking structure of undulating dunes covered by a soft carpet.
The Loro Piana Interiors installation
MILAN – Loro Piana Interiors introduced its new furniture designed by Raphael Navot during Milan Design Week, staging a striking installation at the newly restored Cortile della Seta real estate development.
The brand’s ergonomic Palm collection was nestled under an expansive structure of undulating dunes covered by a soft carpet. “The installation allows a personal connection with the objects,” said Navot, who began to conceive Loro Piana Interiors three years ago, emphasizing comfort, timelessness and craftsmanship, bridging design and fashion.
The first design was the Palm Duet chaise longue launched in 2021, made with the cashfur fabric by Loro Piana Interiors.
Now the new collection includes sofas, daybeds, armchairs, stools, a side table, coffee table and an ottoman. The pieces have a sculptural quality and, while designing with a futuristic approach, Navot shies away from a hyper-technological vision, preferring the idea of a “natural future,” as he calls it.
In sync with all Loro Piana products, touch is an essential sense, and the fabrics chosen to upholster the pieces are all natural and precious. For example, the slightly asymmetrical ottoman is presented in cashfur, a cashmere and silk fabric woven on knitted looms, and in linen. “The collection is rooted in the sensorial aspect of fabrics,” said Navot. Cashfur, he explained, “is very soft but also surprisingly solid,” adding that the collection started from fabrics, “so it would be coherent” with the brand. Likewise, he sees the pieces as “organic, graceful, functional and timeless classic, which is what Loro Piana is about.”
The Palm daybed, with its single armrest, presents a backrest that slopes to one side.
The Loro Piana Méridienne
COURTESY OF LORO PIANA
The lightness of the Palm Sofa in bouclé Bukhara fabric in linen, cotton and wool in natural colors and in linen, is enhanced by the distance Navot puts between the seat and the floor. In addition to the earthy tones are a bold, fiery red, kummel and curcuma.
The wraparound structural sides and the backrest of the Palm armchair, obtained from a single curved piece, give solidity to the chair, while the seat is kept comfortably soft. It is upholstered in Alpaca Suri, bouclé Bukhara fabric and linen.
Loro Piana’s Palm Duet chaise longue and sidelong table
COURTESY OF LORO PIANA
With their vaguely anthropomorphic body and head shape, the Palm stools add a playful touch to the objects. They come in two sizes, and the smaller one has a detachable and reversible seat in fabric and wood, to be used also as a table or tray. Some designs show different materials for the structures and seats in a variety of textiles, from pure cashmere to linen and embroidered wool.
Loro Piana’s Palm stools
COURTESY OF LORO PIANA
Navot and Loro Piana believe in building the category “step by step,” and the designer was pleased to be able to present this second chapter of the segment physically, “as part of the identity of the brand.”
Loro Piana, which is controlled by LVMH Moët Hennessy Louis Vuitton, opened a flagship store in Milan this past spring that was conceived for the public to experience the brand’s furniture, textiles, and accessories. The store is located at Loro Piana’s new headquarters at Cortile della Seta.
The flagship follows the global growth of Loro Piana Interiors, which was first launched in 2006 and whose primary business was in the b-to-b market.
Major Lithium Producer Could Shut German Plant Over EU Rule
Lithium producer Albemarle could be forced to close its plant in Germany if the European Union classifies the key mineral lithium as a hazardous substance that would change the way lithium is processed and stored, the company’s chief financial officer has told Reuters.
The European Commission is currently reviewing and assessing a proposal from the European Chemicals Agency (ECHA) to classify lithium carbonate, lithium chloride, and lithium hydroxide as substances hazardous to human health. An EU committee is meeting early next month to discuss the proposal, while a final decision on the issue is expected toward the end of this year or early next year.
If the EU decides to include the lithium chemicals in the hazardous category, it would deal a blow to its own goals of becoming self-sufficient in batteries this decade and significantly raise the share of electric vehicles on the roads.
The decision would change the way lithium producers and processors work and will add costs to their operations.
In Albemarle’s case, the company “would no longer be able to import our primary feedstock, lithium chloride, putting the entire (Langelsheim) facility in jeopardy of closure,” CEO Scott Tozier told Reuters in an emailed statement.
Albemarle processes lithium products at its Langelsheim factory in Germany, which employs around 550 people.
Albemarle would sustain a financial blow if it had to shut down the German plant.
“With sales of approximately $500 million annually, the economic impact to Albemarle from the potential closure would be significant,” the company’s CEO told Reuters.
The EU is set to meet 69 percent and 89 percent of its growing demand for batteries by 2025 and 2030, respectively, the European Commission said earlier this year. The EU expects to be capable of producing batteries for up to 11 million cars per year, it added.
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EV batteries need graphite – here’s what’s forecast for the vital mineral’s supply
The mineral graphite, as an anode material, is a crucial part of a lithium-ion (Li-on) battery. Electrek spoke with John DeMaio, president of the Graphene Division of Graphex Group and CEO of Graphex Technologies. Read on to learn what he had to say about why graphite’s so important for EVs, what his company is doing to ramp up US sourcing and processing, and what the graphite supply is expected to be in the next couple years.
Electrek: Why is graphite so important for EV battery makers?
John DeMaio: EV batteries contain four basic components: anode, cathode, electrolyte, and separator. While there is much focus on the cathode materials – lithium, nickel, cobalt, manganese, etc. – the predominant anode material used in virtually all EV batteries is graphite.
Overall, EV Li-ion batteries contain about 28% graphite by weight. As both an extremely effective conductor and readily available material, graphite is particularly suitable for Li-ion batteries, as the spaces within the crystal lattice of graphite is suitable for hosting Li-ions in order to store energy in a charged battery, a process known as intercalation. Therefore, if EV battery makers are to meet the burgeoning demand for EVs, a dependable and plentiful supply of specialized graphite is important.
Electrek: What does your company, Graphex, do, and what is its strategy to escalate the sourcing and processing of graphite?
John DeMaio: Graphex performs the mid-stream processing of natural graphite into specialized graphite used in EV batteries. Historically, 70-80% of the natural graphite used in EV batteries has been sourced in China, and almost all midstream processing of graphite has been done in China/Asia.
Graphex has been a significant supplier of coated purified spherical graphite since 2013, primarily into the power battery markets in China. In 2021, Graphex established a subsidiary to localize graphite supply for EV power battery production in the US.
We create consistently high-quality and high-volume battery anode material from any qualified source of raw flake graphite. In order to reduce supply chain interruptions and mitigate geopolitical concerns, we are negotiating offtake agreements and joint venture partnerships with natural graphite sources in the US, Canada, South America, Africa, and Europe.
Our recent announcements to seek listing on NYSE and open a manufacturing plant in Warren, Michigan, along with our plans to diversify our raw material supply, will help provide a local supply anode supply chain for the US market.
Electrek: How does processing graphite in the US alleviate supply chain problems?
John DeMaio: Market analysts expect that over 200 GWh of EV Li-ion battery capacity will be online in the US within the next three years. Assuming each vehicle will be powered by a 60 KWh battery, this will be sufficient to produce 3.3 million vehicles per year. At this rate, the industry will be consuming about 172,000 tpa of graphite, including both natural and synthetic material, for producing Li-Ion battery anodes.
The key to alleviating supply chain concerns – as demanded by the industry and as reflected in much of the legislative focus of the Biden administration – is to domesticate as much of the supply chain as possible. Localizing that entire chain will not happen overnight, so it must be done intelligently, in realistic steps, and with support from industry and government.
In the natural graphite realm, the supply chain begins with mining, then primary processing (shaping and purifying), then final processing (coating), to supply battery and EV manufacturing.
Final processing facilities, such as the one Graphex has announced in Warren, can be brought online relatively quickly and located near to point-of-use, i.e., gigafactories, to provide virtually custom just-in-time supply that has been a staple of auto manufacturing for decades. The primary processing facilities can be co-located with the finish processing facilities or located closer to the sources, i.e, the mine(s), which can then support several finish processing facilities.
The mines themselves, by definition, must be located where the material exists, so in terms of localizing raw graphite supply in the US, the closest source geographically is in Alabama (not online yet), followed by Canada (minimal production until 2024-25), then Brazil (some current production, more planned), Mozambique (currently in production), Tanzania, Madagascar, and other potential locations in Africa (planned).
The industry is moving quickly to achieve the objective of a more local supply chain of critical materials such as graphite, but with demand extremely high and increasing, the path forward will be a combination of existing streams and new streams as they come online.
Electrek: Has the global graphite deficit come to fruition this year as was predicted by Benchmark Mineral Intelligence? If so, how come? If not, how was it avoided?
John DeMaio: The current price action in raw flake graphite concentrate indicates that the supply-demand picture is tightening but it is not yet reflective of a deficit scenario. It’s approximately 20% higher than a year ago. While this represents a premium to last year, it is not displaying the price volatility associated with commodity production shortfalls.
There appears to be several micro and macroeconomic factors that are adding stability to graphite pricing. One, graphite is not traded on a commodities exchange, which makes it more resilient to speculation. Two, there’s been new graphite supply coming to the market, in particular outside China. Three, supply-chain issues with semiconductors have placed some speed bumps ahead of aggressive EV rollouts.
While supply is adequately servicing current demand, Benchmark Mineral Intelligence is now forecasting significant raw flake graphite concentrate shortfalls from 2025. At present, there is still available graphite capacity in the system, with Mozambique capable of producing up to 300,000 tons per annum and mining major Minmetals planning to expand its Heilongjiang capacity to 600,000 tons per annum, according to Benchmark Mineral Intelligence in March.
However, new graphite supply needs to be brought online quickly to meet the necessary demand for EVs and particularly sources closer to the gigafactories and automakers. Rising to this challenge, we are beginning to see junior miners actively planning new graphite production, and we expect to see significant new graphite output in Canada, Brazil, and across Africa in the next three years.
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