COPENHAGEN/FRANKFURT: A deepening economic standoff between Russia and the West over the future of Ukraine has rippled through trading floors and boardrooms, with exporters scrambling to protect revenues and some global financial firms halting services.
US President Barack Obama’s threat to target major sections of the Russian economy should President Vladimir Putin follow up his annexation of Crimea with further incursions in Ukraine has caused alarm in Europe.
Denmark’s Foreign Ministry held a special briefing for about 130 companies, including drugs firm Novo Nordisk on Friday after being inundated with inquiries about the business implications of the crisis.
Lemken, a German manufacturer of ploughs and other farm machinery, has seen a big drop-off in orders from Russia, its second-biggest export market after France, in recent weeks as a sliding ruble raises their sale price.
With Moscow vowing to retaliate against the West’s sanctions, Anthony van der Ley, managing director of the family-run business, is taking no chances. He is sending machinery to Russia now in case the border closes or import charges are hiked.
Profine, a plastic windowframe manufacturer with annual revenues of 700 million euros ($965 million), has so far managed to compensate for the ruble slide by increasing sales but won’t be able to do that forever.
“If there are further sanctions, that would be poison for the economic development of our partners,” said Peter Mrosik, the German firm’s managing partner.
In Canada, Bombardier Inc. said the airplane maker’s planned joint-venture with Rostec, the Russian state-owned industrial and defense conglomerate, was likely to be delayed because of sanctions being considered by Canada and other Western countries. A related deal for Bombardier to sell 100 short-haul Q400 NextGen aircraft was also likely to be held up.
Obama unveiled sanctions against members of Putin’s inner circle on Thursday as well as against Bank Rossiya, partly owned by a Putin ally.
In response, Visa and MasterCard, both based in the United States, stopped providing services for clients at Rossiya and another bank SMP, whose co-owners, two brothers, are also on Obama’s list.
Western Union Co., the world’s largest money transfer company, said it had suspended services through Bank Rossiya branches but was continuing services at more than 20,000 locations and self-service terminals in Russia.
SMP described the move by Visa and MasterCard as unlawful. However, financial services firms are wary of doing business with any person or group that can be linked back to the targets. Banks have paid dearly in the past for violating US sanctions on countries such as Iran.
What bankers and business people fear is an escalation of measures that would choke off international payments and trade, halt investments and stymie deals. Germany’s main trade body warned on Friday that full-blown economic sanctions would be a “real catastrophe”.