Posted on February 24, 2022
Moscow ordered the invasion of Ukraine from Wednesday to Thursday. In response, the European Union pledges “unprecedented isolation“and the sanctions package”heaviest ever performedAgainst Russia. In France, the Economy Minister, Bruno Le Maire, wanted to be reassuring. He ensures that the impact on the French economy will be limited.
1) World stocks plummet after the Russian offensive: towards a Black Thursday
European financial markets opened in a very sharp decline, in the wake of Asian stock markets and Wall Street the day before. The CAC 40 went wild at the opening 4.19% below 6,500 points, while the Dax in Frankfurt fell 4.39% and the FTSE 100 lost 2.55%. The Eurostoxx 50, the European benchmark index, fell by 3.52%. French companies with a strong presence in Russia have also fallen on the Paris stock exchange. Societe Generale fell 10.84% this afternoon, Renault lost 7.87%, Saint-Gobain fell 7.76% and Alstom fell 6.17%. The price of a barrel of Brent, meanwhile, reached $100 for the first time since 2014, and natural gas prices rose 30% in Europe as grain prices continued to rise. Aluminum, essential for the automotive and construction sectors, also hit a new record.
2) French companies present in Russia are on the alert
The West has promised a new set of sanctions after Russia’s invasion of Ukraine. These may indirectly affect French companies with a presence in Russia. According to the Ministry of Economy, more than 500 French companies (including 35 CAC 40 groups) are on site. TotalEnergies, present in Russia for 25 years, is currently involved in two liquefied natural gas projects, Yamal and Arctic LNG2. In 2020, Russia represented 24% of its proven oil and gas reserves and 17% of production. Russia is also the second most important market for Renault, through its subsidiary Avtovaz, with almost 500,000 vehicles sold in 2021. Russian factories also produce almost one in five Renault group vehicles. Societe Generale is also a heavyweight in the Russian banking sector through its subsidiary Rosbank (12,000 employees). French banks are thus among the most exposed to Russian counterparties, at $25 billion, behind Italy but ahead of the United States.
3) Towards higher prices and retaliation for European agricultural products?
In the agricultural market, Russia is the largest exporter of wheat in the world and, together with Ukraine, accounts for a quarter of the world’s exports of this grain. The risk is therefore a supply disruption and a wave of inflation. But the economy minister, Bruno Le Maire, wants to be reassuring about France’s exposure. †Donba wheat is exported to North Africa and more to Europe, this does not affect the price. Prices had been rising for a while. And we respond with the strongest possible protection“, he said on BFMTV. The other risk, raised by Christiane Lambert, the president of the FNSEA, the main agricultural union, is that “retaliatory measures against EU products“, recalling that the agricultural sector was the first target of Moscow in 2014, during the annexation of Crimea by Russia, adding that French farmers have no “never found the volumes that were lost at the time”†
4) No risk of gas or oil shortage in the short term
France will not risk a short-term gas or oil shortage even if Russia interrupts its supplies amid the Russian-Ukrainian crisis, Ecological Transition Minister Barbara Pompili assured Wednesday, Feb. 23. †We have large strategic oil stocks that cover nearly three months of consumption and allow us to deal with supply disruptions. The French will not run the risk of running out of fuel or gas for heating in the coming months.”said the minister. Norway remains the main supplier to France (36%), to Russia (17%), Algeria (8%) and the Netherlands (8%). †The gas price freeze will run until the summer of 2022. If it ever has to be extended because we see a price explosion, I think it is essential to do so.“, said Bruno Le Maire, the Economy Minister. The fact remains that in the medium and long term, France, but especially the European Union, will have to reduce their energy dependence on Russian gas.
5) Russia represents “only” 1% of French exports
“France exports less than 7 billion euros a year to Russia, which is barely more than 1% of French exports.“, confirmed the Minister of Economy, Bruno Le Maire. In 2020, according to the Ministry of Economy, 35.5% of Russian imports came from the EU, mainly from Germany (10.1%), Italy (4.4% ) and France (3.5%), Bercy notes, as well as the impact of economic sanctions”will be stronger for Russia than for the EU. [Cette dernière] exports the equivalent of 1% of its gross domestic product [PIB] To Russia, [celle-ci] export to the EU 11% of GDP†
Concepcion Alvarez @conce1