Sanctions start to isolate Russian commodity firms in international financial markets

Russian energy and commodity companies are becoming increasingly isolated in international financial markets, as the London Stock Exchange suspended shares of more companies March 4 following international sanctions on key banks and companies.

The LSE has suspended trade of global depository receipts of more Russian companies, including Novorossiysk Commercial Sea Port and Federal Grid, Russia’s electricity transmission grid, a day after the suspension of major energy and commodity companies including Gazprom, Lukoil, Rosneft, En+ and RusHydro.

“The catastrophic depreciation of the GDRs and their near-inevitable forthcoming delisting is a huge blow to the respective Russian brands, indicating the effective termination of access to western equity capital markets,” George Voloshin, head of the Paris branch of Aperio Intelligence, told S&P Global Commodity Insights late March 3.

The affected companies have operations across crude and refined products, natural gas, power generation, steel and non-ferrous metals, petrochemicals and port infrastructure.

The move would have operational knock-on effects for the companies involved, Voloshin said.

“The dearth of equity capital and the inevitable loss of access to affordable debt funding will leave the brands affected with big operational problems to manage and a lack of realistic opportunities for further growth and expansion,” he said.

For most of the companies involved, “London was the key and often only gateway to the international investor community,” he said. “With their overseas investor base shrinking drastically, the affected Russian brands will have to refocus on the domestic market where, however, unprecedented adverse developments have been underway since Feb. 24.”

GDRs are financial instruments issued by banks that represent shares in a foreign company, allowing them to be traded on a local stock exchange.

“The London Stock Exchange notes the ongoing deterioration of market conditions since 2 March 2022, and in order to maintain orderly markets, the Exchange has suspended the admission to trading […] with immediate effect” of instruments relating to Federal Grid, Novorossiysk Commercial Sea Port and fertilizer company Acron, it said March 4 in a market notice. “The Exchange will continue to keep this situation under review.”

On March 3, LSE issued a similar notice for a range of other companies “further to recent sanctions in connection with events in Ukraine.”

The companies with suspended shares include the following:

• En+
• Global Ports Investments
• Novolipetsk Steel
• Gazprom
• Lukoil
• MMK
• Nornickel
• PhosAgro
• RusHydro
• Tatneft
• Rosneft
• Sberbank
• Surgutneftegas
• Novorossiysk Commercial Sea Port
• Federal Grid
• Acron

— James Burgess