Europe’s businessmen and women are in a bind. Top executives at some of Italy’s largest companies, including utility Enel and lender UniCredit (CRDI.MI), tuned in for a Zoom chat on Wednesday with President Vladimir Putin to discuss economic ties with Russia. With a possible invasion of Ukraine looming, the government in Rome was unimpressed. The corporate conundrum leaves other European businesses with chunky Russian exposure, especially in Germany, feeling nervous.
U.S. President Joe Biden on Tuesday threatened Russia with export controls and other tough sanctions if it invades Ukraine again. Russia denies any such plans but has 100,000 troops massed on Ukraine’s border. For all its tough talk, the European Union will have a hard time shutting off Moscow economically.
Take trade. Germany exported $25 billion of goods to Russia from January to November last year, second only to China and comfortably more than the $15 billion shipped from the United States.
Others aren’t far behind. Italy will be reluctant to lose its $11 billion of exports to Russia in the same period, close to 1% of its GDP. France shipped a similar quantity.
In the other direction, Russia is the main supplier of oil, natural gas and coal to the EU. But while Germany derives up to three-quarters of its non-EU natural gas imports from Russia, the ratio is less than a half for France and less than a quarter for Spain, Eurostat data shows. Germany thus has greater incentive to avoid a gas embargo.
Companies like Italy’s Pirelli (PIRC.MI), whose boss was due on the Putin call, are also directly invested, with factories in the country of 145 million people. UniCredit and France’s Société Générale (SOGN.PA) both own Russian banks, although the former has cooled on plans to buy another one read more . The EU invested 311 billion euros in Russia in 2019, says the European Commission. Flows slowed sharply in 2020, but Germany remained Russia’s biggest external investor, with 26 projects, according to EY consultants.
Retired European politicians strengthen the ties. Former German Chancellor Gerhard Schröder is a chairman at state oil company Rosneft (ROSN.MM) and on the shareholders’ committee of Gazprom subsidiary Nord Stream.
Former Austrian Foreign Minister Karin Kneissl also sits on Rosneft’s board. An ex-prime minister of France has links with petrochemical giant Sibur. Such figures may well be lobbying against the harshest penalties for Russia and its already stagnating economy. All of which plays into Putin’s hands.
Italian CEOs’ Putin call exposes European discord