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stay, leave or hand over the keys -Breaking

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© Reuters. FILEPHOTO: Formula One-F1 – Russian Grand Prix, Sochi Russia – 29/04/17. Pirelli tyres displayed in paddock. REUTERS/Maxim Shemetov

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MOSCOW (Reuters).- Russian investors and companies faced a series of dilemmas Friday when they considered an offer by Moscow to accelerate their exit from Russia and hand over ownership to local managers until then.

Andrei Belousov’s options came one week following Russia’s invasion in Ukraine. It also happened a day after Societe Generale, a French bank (OTC:), warned it that its Russian operations could be canceled. That sent a chill down companies who wanted to keep their jobs.

Belousov suggested three options for foreign companies.

In a statement, he stated: “The company continues its work in Russia.” He said that foreign shareholders can transfer their shares to Russian partners to manage them and could return to the market later. “The company permanently ceases operations in Russia and closes all production. It also dismisses its employees.”

Every route has its risks. The risk of losing your shares in Western markets could cause you to lose it.

Russia’s invasion prompted Europe and the United States to place sweeping sanctions. They affect global payments systems and a variety of high-tech products. This makes doing business with Russia more difficult and risky.

It means economic hardship for ordinary Russians.

Several multinational companies, such as the energy majors BP and Shell (NYSE:), have said that they will be quitting. However, others are still waiting to leave Russia. TotalEnergies stated it will stay, but not to invest further.

IKEA stated plans to close all stores by Thursday. However, it said that the company would continue paying its 15,000 Russian workers for at most three months.

NO EASY FIXES

Pirelli Italian Tyre Maker said Friday that it monitors developments through a special “crisis board”, and added it didn’t expect to stop either its Russian or Italian plants.

Finland’s Nokian Tyres announced last week that they were shifting production to Russia for some of their product lines.

There are not easy solutions even for traders looking to exit the market.

Royal London, a British asset manager and insurer, announced that it would sell Russian assets. It claimed they only account for 0.1% of the company’s portfolio.

Barry O’Dwyer, Chief Executive, stated that “we can’t trade those things anyway” and that “we obviously intend to divest as soon as possible.”

The Russian First Deputy Prime Minister said that a rapid-track plan for bankruptcy “will support employment and the social well-being” of Russian citizens, so bona fide entrepreneurs are able to ensure the efficient functioning of their businesses.

Many businesses are still trying calculate how much Russia will cost them. The number keeps increasing with each round of sanctions by the United States, Britain, and EU.

As of now, global banks, investment firms and companies have reported that they are exposed to Russia in one way or another. The number of exposures could increase. Morningstar research shows international fund exposure to $60 billion worth of stocks and bonds.

Norway’s sovereign wealth trust, which is the largest in the world said Thursday that the $3 billion of Russian assets it owned had been written off.

‘EXTREME SCENARIO’

SocGen’s $20 billion Russian exposure means that it has an adequate buffer to deal with an “extreme” scenario in which its bank assets in Russia would be seized.

The Dutch bank ING gave an update Friday regarding its exposure to Russia, Ukraine and said that about 700,000,000 euros (or $770 million) of outstanding loans had been affected by the “new sanctions against (Russian] specific entities or individuals”.

BASF, one of the largest chemical companies in the world, announced that it would not be doing business with Russia or Belarus except to stop food production for humanitarian reasons.

BASF did however highlight the challenges that companies face when trying to navigate through an avalanche of sanctions.

BASF stated, “Effectively immediately, BASF will not conduct business in Russia or Belarus that does not comply with existing obligations under applicable laws and regulations.”

Swatch Group, a Swiss watchmaker (SIX) stated that it will continue operations in Russia and would not stop exports “because of the general difficult situation.”

Deutsche Bank (DE) stated it had stress-tested its operations, given that it operates a large Russian technology centre. However, it said that its global business is still possible.

In December 2012, the German lender opened a Moscow office. It said that this was a “significant investment” and a commitment to Russia.

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