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Evening Standard
Evening Standard
Oscar Williams-Grut

‘Uninvestable’: Businesses rush to cut ties with Russia as ‘moral’ pressure grows

Business secretary Kwasi Kwarteng has said there is a ‘moral’ chase for cutting ties with Russia

(Picture: REUTERS)

Russia is facing a potential $32 billion (£24 billion) exodus of international cash as investors and businesses flee the country.

City chief executives and fund managers said exposure to Russia was now impossible as war in Ukraine escalates.

Stephen Bird, chief executive of FTSE money manager Abrdn, and Luke Ellis, CEO of hedge fund Man Group, both called Russia “uninvestable” today.

Separately, Jaguar Land Rover said it was “pausing” delivery of its cars to the Russian market. It joins a growing number of businesses severing ties to Russia.

Bill Browder, CEO of Hermitage Capital and a leading anti-Russian corruption campaigner, said: “It’s been obvious for quite a while that Russia has been an uninvestable country.

“Any fund manager who still owns shares in Russia has some serious explaining to do to their clients about why they ignored all the warning signs.”

Evraz and Polymetal International, two of the London markets most prominent Russia-linked stocks, will tomorrow be dumped from the FTSE 100 after City investors sold out in droves. Evraz has lost over half its value since the start of the war with Ukraine, while Polymetal has seen its share price collapse 75%.

Moscow’s stock market remained shut today but overseas-listed notes linked to Russian companies tanked. Depositary receipts for state-run gas giant Gazprom dropped as much as 32%, while the nation’s biggest lender, Sberbank, lost 23%.

Bitcoin spiked over 10% as Russian capital controls and a collapsing rouble prompted a rush into cryptocurrency.

Speculation is mounting that index compilers will soon axe Russian shares from listings. Indexes are used to construct products worth hundreds of billions across the investment industry. Any changes will force money managers to dump Russian stocks.

Brian Freitas at Smartkarma said a removal of Russian stocks from MSCI indexes could see $32 billion pulled from Russia, Bloomberg reported.

Most money managers are already trying to sell but are struggling with markets shut and sanctions in place. Abrdn, formed from Standard Life and Aberdeen Asset Management, has £2 billion worth of Russian assets, a mixture of equity and debt. That is less than 0.5% of its total funds, but clearly a headache.

Simon Pilcher, head of the £66 billion Universities Superannuation Scheme, told BBC Radio 4’s Today Programme: “We think there’s a clear financial, as well as a moral case with respect to divestment of our Russian holdings. We’ll be looking to sell.”

Last night Shell followed BP and Norway’s Equinor in ditching its energy investment in Russia, with Shell CEO Ben van Beurden citing the “senseless act of military aggression”.

Business secretary Kwasi Kwarteng tweeted: “There is now a strong moral imperative on British companies to isolate Russia.”

MasterCard and Visa have blocked various Russian institutions from their networks in response to sanction.

Scrutiny is turning to companies that continue to do business with Russia, including City law firms, consultants and banks.

Pressure is also ramping up on Glencore. The mining and commodities giant owns 0.5% of Russian state oil giant Rosneft and has a 10% stake in energy and metals business EN+. EN+ and its significant owner Oleg Deripaska were sanctioned by the US in 2018 over alleged links to the Russian state.

Glencore declined to comment.

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