Prime Minister Theresa May today said the UK will expel 23 Russian diplomats as part of a series of measures following the “attempted murder” against ex-spy Sergei Skripal and his daughter Yulia. The diplomatic flare-up raises serious questions for Russian business.
Will Russian firms find it harder to list in London?
Yuen Low, analyst at Shore Capital, thinks listing and other financials-related sanctions could be expected to make it harder for Russian companies to raise money in London. Russian London interests are concentrated in finance and energy.
“Generally speaking, negative sentiment could make investors wary about investing in Russian names – especially if it appears that the Russian government might retaliate by, say, expropriating operations – and adversely affect share prices, but this would also adversely affect UK holders of those shares.”
What about energy firms?
While analysts suggested that Britain could operate independent of Russia when it comes to gas supplies, they said individual companies were more likely to be hit by any wide-ranging retaliation by the UK.
BP and Shell stood out as the most vulnerable. BP owns just under 20 per cent of Russia’s Rosneft, and Neil Wilson, senior market analyst at ETX Capital, said Russia could “make life hard for BP if it chooses to”.
Shell, meanwhile, is involved with the building of the €9.5bn (£8.4bn) Nord Stream 2 pipeline and an liquefied natural gas (LNG) plant in Sakhalin in the far east.
“Any major deterioration in UK-Russian relations could, in theory, start to impact them at some stage,” said Russ Mould, investment director at AJ Bell.
Jasper Lawler, head of research at London Capital Group, warned: “Britain has always been attractive to Russian businesses as a free, open and welcoming economy. British firms will want to avoid drawing the ire of the government, Russian firms will feel unwelcome and banks will be forced to make funding investment in Russian businesses costlier, if not impossible.”
How will Russians react?
Russians go to the polls on Sunday to elect their new President. In practice, the chances of them returning anyone other than Vladimir Putin are vanishingly small. May’s response risks “playing into Putin’s hands” by provoking stronger nationalist feeling in Russia and boosting turnout, according to Joan Hoey, director of Europe at the Economist Intelligence Unit. “Logic would seem to suggest it might have been better to hold fire until after the elections,” she added, when firmer evidence the attack was definitely Russian will be available.
Could UK take aim at oligarchs?
Russian opposition leader Alexei Navalny has suggested the UK target billionaire owners of football clubs along with other wealthy Russians in London. Options could involve stronger enforcement of unexplained wealth orders, a new power to investigate suspicious assets. However, analysts warned the UK must be careful to follow due process, or else risk underming the reputation of legal institutions. Any political interference in the judiciary – even in the service of targeting illicit wealth – could end up doing more harm to the UK.