For decades, global finance companies nurtured Russia’s corporations, billionaires, and government, and then suddenly war broke out in Ukraine.. Russia’s economic exclusion is perhaps the harshest and most rapid of a large industrial economy to be remembered.
Citigroup, which has thousands of employees and billions of dollars in assets in Russia, has said it will cut much of its business in the country. Goldman Sachs, JPMorgan Chase and Deutsche Bank are also moving out of Russia. In conjunction with the relocation of some financiers, lawyers and others to other centers, such as Dubai.
The past few weeks have seen a rush to understand and implement the constantly updated sanctions by jurisdictions including the US, UK and EU that have paralyzed trade as traders find themselves stuck with unconvertible Russian stocks and bonds while The derivatives associated with them have been left in limbo.
As for the finance sector, billions of dollars are at risk, as dozens of lenders, including Raiffeisen Bank International, Citigroup and Deutsche Bank, have about $100 billion of common cash risk in Russia, according to data compiled by The Times. Bloomberg.” But the companies emphasized that their budgets could easily absorb any blow to their Russian business.
Hours after the start of the war, financiers in Moscow witnessed the virtual collapse of companies that had been in bad shape until last month. One local investment manager reported that his colleagues woke him up to come to the office quickly that morning, as his company was dealing with $ 6 billion in pension funds. But he now believes that his clients’ assets are worth only a small part of that or nothing at all. Another manager in charge of a group of traders in Moscow said the level of work in his office had fallen by three-quarters after foreign brokers stopped doing business with his company.
Russia’s VTP Bank is sanctioned by the United States and its British unit is suspended, with bank employees reporting that many Western companies are not answering their calls and emails, according to a recent Bloomberg article. This has led to investment bankers struggling to close deals. With counterparties.. But some companies have remained in contact with the bank and have largely been able to clear their pending deals, while others have cut ties once the sanctions were announced, but the business could take much longer to break up.
Bill Browder, who was a major foreign investor in Russia, stated that investment banks played a key role in opening up Russia and bringing its money to the rest of the world. An example of the complex network of relations between Russia and global banks is the investment company LetterOne Holdings, which was founded by Russians, including billionaires Mikhail Friedman and Peter Aven. Bloomberg also reported that HSBC Holdings’ hedge fund contained $547 million of Letron’s money at the end of 2020, while the Blackstone investment group had $435 million. And Pamplona Capital Management Pamplona Capital Management, which manages about $3 billion of Litrona’s money, has begun returning its money.
JPMorgan has been a big player in issuing debt to Russian companies, competing with local giants such as VTB and Citigroup, among others. But the bank said it was “actively dismantling” its Russian business. Natalie Garesko, a former Ukrainian finance minister, said banks should cut business with Russia because it’s the right thing from a commercial point of view, but also an ethical point. Georgy Egorov, a former Goldman Sachs banker, said he was nauseous about Wall Street’s connections to Russia, calling for the bank to pull out in a LinkedIn post before the bank announced it was leaving the country on March 10.
Consultants, lawyers and auditors are also leaving Russia, although it is a difficult process. The Big Four accounting firms, Deloitte, KPMG, PwC and Ernst & Young, will have to cut ties with Its member Russian and Belarusian companies, which are owned by local partners.. These Russian entities can continue to work with their clients but can no longer access the company’s global network.
The separation process won’t be quick, and is likely to get more complicated, said Ashish Nanda, senior lecturer at Harvard Business School, so what if a Russian client is now under sanctions and has a subsidiary in non-sanctioned Mexico? What if Russian accountants were doing business in neighboring Kazakhstan? Management consultants and law firms cannot easily ditch their Russian operations, so firms such as McKinsey, Bain, Linklaters, and others must support their Russian partners and employees with existing client commitments. and their relations with the state.
Nick Lovegrove, a professor of management at McDonagh School of Business in Georgetown who spent 30 years with McKinsey, described the process as woefully complex arithmetic. In the early days of the war, McKinsey initially stated that it would stop working with government entities. Russian only .. But after four days, the company stated that it would stop working with government entities immediately and would not do any new work for clients there, but that its office in Moscow would remain open, noting that other competitors, such as “Bain” and “Boston Consulting Group” Consultancy, they adopted similar positions.
For professional services firms that remain in Russia, there are two options left, according to legal counsel Tony Williams: Either shut everything down or turn the business over to partners on the ground. You could say it’s closing temporarily, but it won’t come back unless there is a radical change. With the war approaching its second month, there is hardly any sign of the situation changing.
Perhaps it’s time for a career change for those who specialize in servicing Russian customers, with one executive familiar with the matter stating that a broker for some of Russia’s richest businessmen is now looking to become a classic car dealer.