The Times - UK (2022-04-13)

40 Wednesday April 13 2022 | the times

Business

Nokia joins

its rival in

pulling out

of Russia

Alex Ralph

Nokia, the telecoms group, is pulling
out of Russia, becoming the latest
company to exit following the invasion
of Ukraine.
The group said it had become clear
early in the war that it would not be
possible to remain in Russia and that it
would take a provision of about
€100 million for its first quarter.
The Finnish company said it had
already suspended deliveries, stopped
new business and begun moving
research and development activities
out of the country in recent weeks
Western governments have raised
concerns over the risk of critical tele-
coms network infrastructure in Russia
failing as access to the internet and
information can provide “outside per-
spectives” to counter state media.
Nokia said it therefore aimed to pro-
vide support to maintain the networks
as part of its exit and was applying for
licences. “This is the most responsible
course of action for Nokia to take as we
exit the Russian market,” it said.
Nokia, founded in 1865, is one of the
world’s largest telecoms infrastructure
companies, with customers in about
130 countries.
Its move goes further than its rival
Ericsson, which said on Monday that it
was suspending its business in Russia
indefinitely and has put employees on
paid leave. Ericsson, based in Sweden,
has about 600 employees in Russia and
said it would record a $95 million provi-
sion for its first quarter. Ericsson had
suspended deliveries to customers in
Russia in February.
The scaling down of operations by
the telecoms companies comes amid
discussions over the Nordic countries
joining Nato. It also provides an
opportunity for Chinese companies
such as Huawei to increase their
market share in Russia.
Moscow had said last year that it
would extend telecoms operators’ li-
cences beyond 2023 for networks on
condition they built networks using
only Russian equipment. Nokia will not
implement a planned joint venture,
announced in November, with Yadro, a
Russian technology company, to build
4G and 5G telecom base stations. Nokia

Who’s staying, and who’s keeping their distance

Maintaining Russian interests

AB InBev (Belgian brewer)

Has said it is “seeking to suspend Bud

sales” in Russia

Alibaba (Chinese technology group)

Stakes in joint venture AliExpress

Russia and social media group VK

EDF (French utilities provider)

Still operating in Russia

Emirates Airlines

Said in a statement that it will

continue to fly to Russia until the UAE,

its owner, says it no longer can

Koch Industries (US conglomerate)

Owns Guardian Industries, which has

two glassmaking facilities in Russia

L’Occitane (French beauty brand)

Stores are still open in Russia

Mulliez (French retail group)

Employing thousands of staff across

Russian stores run by chains including

Auchan and Leroy Merlin

Pausing future development

AstraZeneca (pharmaceutical

group) Supplying “essential and

life-saving medicines” but not

planning new investments or

clinical trials

HSBC (UK bank) Curtailed Russian

access to financial markets

Nestlé (food conglomerate)

Halted non-essential imports and

exports to Russia

Suspending activity

Caterpillar (industrial machinery

maker) Halted operations at

factories in Russia

Goldman Sachs (investment bank)

Winding down operations in Russia

Yum Brands (fast food group)

Shut all company-owned KFC

outlets

Source: Yale Chief Executive Leadership Institute, April 12

Marcus Leroux, Emily Gosden

Glencore funded two Russian refinery
businesses whose owners are close
associates of President Putin, docu-
ments show.
The FTSE 100 commodities giant
has sought to play down its links to
Russia since the invasion of Ukraine,
saying that its trading exposure to
Russia is “not material”. But newly un-
covered documents show that in recent
years it has had more extensive deal-
ings benefiting senior figures close to
the regime than previously reported.
Glencore entered into two “pre-pay-
ment” deals in 2016 in which it provided
cash upfront to Russian refineries, to be
repaid via the supply of 1.5 million
tonnes of refined oil products, Compa-
nies House filings show.
The products that it was to receive
were worth about $800 million at 2016
prices, according to SourceMaterial,
the investigative journalism group that

uncovered the filings. The first deal was

for vacuum gasoil, used to make petrol

and diesel, from the Novoshakhtinsk

refinery, which was part-owned by Vik-

tor Medvedchuk, the Ukrainian oli-

garch and pro-Putin politician.

Medvedchuk, who counts the Rus-

sian president as godfather to one of his

children, was placed under sanctions by

the US and Canada for his alleged role

in undermining Ukrainian sovereignty

in 2014, and was put under house arrest

in Kyiv last year awaiting trial for trea-

son and attempted looting of national

resources. Ukraine said he escaped

days after the Russian invasion, a claim

denied by Medvedchuk, who also de-

nies wrongdoing.

The second deal was for naphtha,

used to make paint and in petrochemi-

cals, from a company called NefteGaz-

Industriya (NGI). NGI is the trading di-

vision of the Afipsky refinery and was

owned at the time by Vladimir Kogan, a

longstanding Putin associate said to

have played a key role in introducing

the future president to the Tambov

organised crime gang, with whom he

cut a deal to establish his authority as

deputy mayor of St Petersburg.

Both the 2016 Glencore deals were

underwritten by Sberbank, resulting in

the Swiss arm of the Russian state-con-

trolled bank taking security over

certain Glencore bank accounts in

London. Glencore says it has no con-

tinuing business with either refinery.

Glencore’s relations with the Krem-

lin have come under increasing scruti-

ny since the war. The refinery deals

were struck in the same year Glencore

raised eyebrows by engineering the

purchase of a 19.5 per cent stake in

Rosneft, the Russian oil company, by

Qatar’s sovereign wealth fund, Glen-

core’s largest investor. Ivan Glasenberg,

then Glencore chief executive, was

awarded the Order of Friendship by

Putin in 2017. The deal earned Glencore

a 0.5 per cent stake in Rosneft — led by

Igor Sechin, Putin’s right-hand man —

and valuable rights to market Rosneft’s

crude oil for five years.

Glencore said last month it had con-

cluded there was “no realistic way” to

exit its Rosneft stake or its 10.55 per cent

stake in Oleg Deripaska’s En+ group. It

emerged last month that between 2018

and 2020 Glencore employed Polina

Kovaleva, the unofficial stepdaughter

of Sergey Lavrov, Russia’s foreign min-

ister. She is now on the sanctions list.

Glencore said: “Following an open

market tender process, Glencore

entered into a pre-payment and off-

take agreement with NefteGazlndus-

triya LLC (NGI). This arrangement was

fully discharged and consequently

terminated at the end of 2017.

“Glencore’s commercial relationship

with Novoshakhtinsk, entered into

following an open market process,

ended in 2017. Glencore has no current

commercial relationship with either

NGI or Novoshakhtinsk.”

Energy ban

must be next

step, EU told

Mehreen Khan Economics Editor

Ukraine’s finance minister has urged

the European Union to impose a full-

scale ban on Russian energy imports

and said that any economic downturn

sparked by the blockade was a price

worth paying to punish Moscow.

Sergii Marchenko said that ending

the EU’s reliance on Russian oil and gas

would not trigger a big downturn in the

bloc in terms of gross domestic product,

perhaps 1 per cent.

“I don’t expect a great recession in

the EU... but for us [energy imports

cause] great damage,” Marchenko told

Sky News.

Germany has led the way against an

immediate EU ban on Russian natural

gas and oil, which makes up over half of

the country’s total energy imports. Olaf

Scholz, the chancellor, has promised to

wean the economy off Russian energy

but his government has not committed

to a phase-out date. Viktor Orban,

Hungary’s prime minister, is also

blocking tentative EU plans for a crude

oil embargo after import bans by the

UK and the US last month.

Marchenko said a total EU energy

embargo was vital to prevent Moscow

receiving lucrative foreign currency

flows that are helping it to circumvent

international sanctions and continuing

to fund Russia’s campaign in Ukraine.

“Sanctions are not enough and we

need much more because we are still at

war with Russia,” Marchenko said. “An

embargo on oil and gas from Russia will

be a next step and we are eager for this

from the EU and different countries.”

He estimated that Ukraine will need

$500 billion in postwar reconstruction

funding for an economy that has lost

30 to 50 per cent of its economic output

since the conflict began.

European countries have varying

dependencies on Russian energy. Italy,

among the largest customers of Rus-

sian natural gas, has struck a deal with

Algeria for natural gas imports to help

replace Moscow’s hydrocarbons.

Brian Coulton, chief economist at

Fitch Ratings, said disrupted energy

supplies to Europe from Russia meant

the “risk of EU energy rationing is

getting higher and higher by the day”.

The World Trade Organisation has

downgraded its global trade forecast

from 4.7 per cent to 3 per cent growth

this year due to the impact of the war.

said Russia accounted for less than

2 per cent of its €22.2 billion net sales

last year. “Strong demand” in other

regions meant Nokia did not expect the

exit to hit its full-year guidance given in

February. Its decision affects about

2,000 employees, although Nokia is

looking to transfer some to other parts

of its business.

Paolo Pescatore, a telecoms analyst

and founder of PP Foresight, said

neither company will be paid for their

networks in Russia and “it is unclear

whether they will have to or be able to

support the current infrastructure”.

He said the decisions were inevitable

following sanctions and “this repre-

sents a further opportunity for other

players such as Huawei to continue

growing their presence in the country”.

He added: “It will impact Russia’s cur-

rent networks and the rollout of next

generation fixed and mobile infrastruc-

ture, causing significant disruption —

more so at this time given the import-

ance of robust and reliable connectivity.”

Nokia will not go ahead with a joint venture announced last year to build 4G and 5G base stations with a Russian company

6 General Motors has struck a deal

to buy cobalt for its electric vehicles

from a Glencore mine in Western

Australia (Emily Gosden writes).

The cobalt from Glencore’s

Murrin Murrin operation will be

used in GM’s Ultium battery

cathodes, used for vehicles including

the Chevrolet Silverado, GMC

Hummer and Cadillac Lyriq.

Carmakers are scrambling for

crucial battery metals amid supply

chain disruptions and price spikes.

Cobalt is added to lithium-ion

battery cathodes to improve energy

density and battery longevity.

Glencore already has a deal to

supply cobalt to Tesla from the

Democratic Republic of Congo.

Jeff Morrison, GM vice-president

for global purchasing and supply

chain, said it was “focused on

sourcing critical raw materials in a

secure, sustainable manner”.

ANDREAS GEBERT/DPA/ALAMY

Glencore funded refineries of Putin allies