the times | Wednesday February 23 2022 37Business
also have to review their exposure to
Russia: UK exports to Russia stood at
£4.3 billion last year, including cars,
drugs, machinery and services.
Jeffrey Cottle, a partner at law firm
Brown Rudnick, said there was a
“mounting sense of urgency among
[western] companies exposed to Rus-
sian suppliers and customers. They
need to plan for potential UK and US
sanctions in order to minimise the
impact on their business should these
sanctions be implemented.
“Industries most likely to be affected
include energy, mining and financial
services. However, even companies
without direct links to Russia are taking
a closer look at their supply chains, cus-
tomers and banking relationships.”
Of the five banks sanctioned by the
UK yesterday, Promsvyazbank, which
mainly finances Russia’s defence indus-
try, is the largest; the other four banks
have been targeted because they have
significant operations in Crimea.
City sources advising UK companies
on the potential impact believe that the
government will look at imposing sanc-
tions on 11 larger Russian banks if Putin
does not retreat from Ukraine. They
pointed to a list of banks set out in a US
sanctions bill, known as the Menendez
bill, in January. They include Gazprom-
bank, SberBank, Alfa Bank, VTB, the
Russian Direct Investment Fund and
the Credit Bank of Moscow.
UK companies have been warned by
legal advisers that domestic banks
could block transactions even if they
are permissible, because they will adopt
a conservative approach to avoid the
risk of regulatory fines.
Financial services firms will need to
understand any exposure the sanc-
tioned Russian banks may have to
derivatives, credit default swaps, or bigJohnson’s sanctions
wide of the mark
H
ow about banning
Chelsea FC from the
Premier League? At
least people have heard
of Roman Abramovich
— the club’s oligarch owner, mainly
famous for firing managers. How
many football fans would complain
if he got a kicking?
Instead, Boris Johnson has gone
after a trio of Putin’s pals who are
hardly household names. There’s his
namesake, Boris Rotenberg, an
ex-judo mate of the warmongering
president and co-owner of the SGM
Group, big on building oil and gas
pipelines. Plus his nephew Igor, the
son of Putin crony Arkady: another
judo fanatic, presently slugging it
out with his ex-wife over a
£27 million pad in Surrey. The last of
the trio? Gennady Timchenko, an
ice hockey nut worth $23.6 billion
according to Forbes, who controls
the Volga investment group, big in
energy, logistics and infrastructure
whose portfolio companies have
$116 billion sales.
Yes, they’re all Putin playmates,
now banned from Britain, with their
UK assets frozen. But they’ve been
on the US sanctions list since 2018,
so the PM’s a bit late to the party.
And the five sanctioned Russian
banks — Rossiya, IS Bank, General
Bank, Promsvyazbank and the Black
Sea Bank — don’t even include the
state-backed big two, Sberbank and
VTB. True, Johnson called it “the
first barrage of what we are
prepared to do”. But as Bill Browder,
the Hermitage Capital boss and
long-term Putin critic tweeted:
“Pretty tepid if you ask me”.
Targeting individuals only works,
too, if it’s a global effort. Another
Putin sidekick, Igor Sechin, the boss
of state-backed oil group Rosneft, is
also a star of America’s post-Crimea
sanctions list. But that hasn’t
stopped one of Britain’s biggest
companies, BP, holding a 19.75 per
cent stake in Rosneft. Or
repatriating dividends, expected to
top $1 billion this year. Or having its
greened-up boss Bernard Looney sit
on the same Russian board as
Sechin. No wonder Putin thinks
sieve-like sanctions are a workable
trade-off for his assault on Ukraine.
Devising punishments that hurt
him more than everyone else is a
minefield, too, not least when Russia
is at the centre of the energy
market, while its larger banks are
entwined in the global banking
system. Germany’s decision to halt
approval of the Nord Stream 2 gas
pipeline drew this jibe from Dmitry
Medvedev, deputy chairman of
Russia’s security council: “Welcome
to the brave new world where
Europeans are very soon going to
pay €2,000 for 1,000 cubic metres of
natural gas!”. As Liberum analysts
also noted, Russia’s reaction to
sanctions will be to “stop its gas and
oil exports to Western Europe,
aggravating the energy crisis there”.
Similarly, banning Russia from
the Swift financial transaction
system could backfire. Bank of
International Settlements data
shows that European lenders hold
most of the near-$30 billion of
foreign banks’ exposure to Russia.
So a ban risks leaving them with
loans that would not be repaid.
Proposals to cut Russia’s access tothe market for semiconductor chips
could also rebound. Russia controls
more than two-fifths of the world’s
palladium, used in the chips, and
owns the biggest supplier of
titanium. The 2018 sanctions on
Rusal showed what can happen:
aluminium prices rocketed and
Washington backed off.
Even so, higher consumer prices
may be the necessary cost of
hurting Putin. And there’s far more
Britain could do: stopping access to
London’s capital markets, say, for
the two dozen Russian companies
with listings over here, including
Gazprom, Rosneft and Sberbank. Or
freezing the UK assets of anyone
with verifiable links to Putin. Or
closing the loophole that allows
oligarchs to own British property via
anonymous offshore companies. Or
simply going after more high-profile
oligarchs. The PM’s early shots are a
long way from hitting the target.Bounced out
I
f only the bounce back loan
scheme lived up to its name. The
latest from the public accounts
committee drives home how much
isn’t expected to bounce back. Of
the £47.4 billion doled out to small
companies in a fit of pandemic
panic, £18.4 billion is expected to be
lost to companies going bust or to
fraud. Big figures can be
meaningless. So, think of it this way:
the annual defence budget handed
out, with those for both the Home
Office and HMRC written off.
That around £5 billion of the
1.6 million loans is thought to have
been nicked by fraudsters was
reason enough for Lord Agnew of
Oulton to quit. The anti-fraud
minister reckoned the oversight of
the scheme by the Treasury,
business department and British
Business Bank was “nothing less
than woeful”. Yes, UK banks were
under pressure to advance loans for
fear of companies failing. But that
still doesn’t excuse the £50,000 for
Asif Hussain, a serial fraudster with
48 previous convictions, who used
the money for a conspiracy to steal
and export flashy cars. A
Manchester judge said it “defies
belief” he was ever handed a loan.
The PAC is calling for a lot more
government “accountability” over
where taxpayer money has gone to
ensure that “lessons are learnt”. Our
economic bounce back from Covid
won’t be complete without it.All hale?
S
o that’s what Unilever’s Alan
Jope was so keen to spend
£50 billion on: Haleon, a cross
between the old English word
“hale”, meaning “in good health”,
and the fast-food chain Leon. It’s
the new name for Glaxo’s
demerging consumer health wing:
the one with £10 billion sales the
board thinks is worth £60 billion.
On the menu is Sensodyne,
Voltaren, Panadol and Centrum.
Glaxo says Leon is also “associated
with the word strength”. That’s one
way to describe the taste of that lot.[email protected]business commentary Alistair Osborne
UK interests
31 £382bn
Number of
Russian
companies
listed on the
London Stock
ExchangeCombined market
value of Russian
companies listed
on the London
Stock Exchange£11.2bn
Foreign direct
investment in
Russia from the
UK in 2020£11.6bn
Imports to UK
from Russia in
2021, up 43.6% on
previous year£4.3bn
UK exports to
Russia in 2021,
up 0.6% on
previous yearProcessing facility of the
Rosneft-owned Priobskoye
oil field, Siberia, RussiaFloat plan
could value
Porsche at
€200bn
Porsche is the latest sports car brand to
be readied for flotation as its owners,
Germany’s Volkswagen and the Piëch
and Porsche families, confirmed a
preliminary agreement to look at an
initial public offering.
There was fevered speculation over
how much the Porsche marque could
be worth as a standalone company with
the Financial Times reporting investors
reading across from other companies,
such as the $875 billion tag put on Tesla,
indicating it could be worth as much as
€200 billion. That would dwarf the
€115 billion stock market valuation of its
current parent Volkswagen.
Jefferies, the stockbroker, using more
old-fashioned metrics reckons a valua-
tion of Porsche would be nearer
€60 billion to €90 billion, between two
and three times annual revenues and
20 to 30 times earnings. The broker said
there would probably be a discount on
the valuation because of complications
over residual parent shareholdings and
corporate governance issues.
Porsche, based in Stuttgart, is one of
the most famous marques, founded by
Ferdinand Porsche and Anton Piëch
more than 90 years ago. The Porsche
911 is up with the Jaguar E-Type and the
Aston Martin DB5 as amongst the most
readily identifiable and coolest sports
cars ever built.
The original Porsche company has
had links with Volkswagen since before
the Second World War. Decades of
collaboration eventually led to Porsche
in 2007 becoming part of VW’s stable of
brands which include Audi, Bentley,
Lamborghini and Bugatti as well as
Skoda and Seat.
However, that arrangement of com-
plicated cross-shareholdings, in which
the inter-married Porsche and Piëch
families, through Porsche Automobil
Holding, hold more than 50 per cent of
the Volkswagen group, has led to regu-
lar bust-ups and legal actions.
Yesterday Volkswagen and the Piëch
and Porsche families announced they
are in “advanced discussions” to float
the Porsche brand as a standalone
operating company, but added: “Whe-
ther a framework agreement is con-
cluded... is currently open and depends
on the approval of both parties’ boards.”
News of a Porsche float follows re-
ports in The Times this week that Geely,
the Chinese automotive giant, plans a
float of Lotus, the sports car manufac-
turer currently based in Norfolk. Ferra-
ri was floated in New York in 2015 when
the Fiat group, now part of Stel-
lantis with Peugeot
and Vauxhall, gave
up control. Aston
Martin Lagonda
was floated in
London in
2018, a
move gen-
erally re-
garded as
disas-
trous as
the com-
pany
had to
be
bailed
out by
the For-
mula
One tycoon
Lawrence
Stroll, left.Robert Lea Industrial Editorloans where they are among a group of
lenders. It is understood that the
Prudential Regulation Authority
contacted banks to understand the
credit risk and exposure to Russia prior
to imposing the sanctions.
Further sanctions could impact City
law firms, which have long catered to
Russian firms and oligarchs for dispute
resolution and work on transactions.
The complexities and risks for British
businesses will no doubt factor into
government thinking as it mulls the
next stage of sanctions, and are another
reason why Browder argues sanctions
should focus on the UK interests of
Russian oligarchs he alleges are har-
bouring funds for President Putin.
“Freezing the assets of corrupt Rus-
sian oligarchs [only really affects] a few
British high-end boutiques, car dealer-
ships and estate agencies, but it could
prevent war in Ukraine because this is
the most direct way of getting to Putin,
his personal interests,” he said.
“The last 20 years of permissive atti-
tude towards dirty Russian money has
created a huge advantage for us right
now. We can enact sanctions that have
an outsized effect on this crisis because
there is so much Russian money here.”
Yet behind the scenes, UK business
leaders remain nervous and have urged
the government to do its due diligence
before imposing sanctions on further
oligarchs. “They tend to own a lot of
stuff. It might be that you think they are
in oil and gas but then you find out they
own a lot of gold,” said one source close
to discussions with the government.
“Politicians need to understand what
industry they will be impacting by
imposing sanctions and help people
understand what they aim to achieve.”
6 Additional reporting by
Ashley Armstrong