How the Russian crisis could hit your pension
Britain may possibly not be right in the line of fire but some of our greatest organizations – held in several pension funds – could be severely impacted by sanctions 
Russia is at present just outdoors the listing of Britain’s best 10 trading partners, accounting for just beneath 2pc of exports and a small more of our imports. So Russian trade is essential to Britain, but naturally nothing at all in comparison to our backlinks with Germany or the United States, which every account for all around 13pc of our imports and exports.
Nonetheless, Russian links to the Uk economic climate extend to a range of distinct sectors, from retail and customer items to finance – and of program into the oil and gas market.
Extending sanctions to cover exports to Russia of technologically sophisticated oil exploration and manufacturing tools, essential to the modernisation of the Russia power sector is one issue, but a ratcheting up of sanctions more could, in extremis, be a problem for BP. It’s a risk the company flagged to traders on Tuesday.
Now BP is a very huge constituent in several United kingdom pension programs – and it owns a near 20pc stake in Rosneft, the Russian oil company. This stake accounts for about 10pc of BP’s present value market place, which is around £90bn. Any more impairment of this organization or a forced cessation of ownership would possibly be extremely negative for BP – and by extension for British pension pots.
In which we don’t have to worry in the Uk is over the direct supply of organic gasoline. The Russian company Gazprom owns close to a fifth of the world’s fuel supplies, with Russia presently supplying about a third of all of Europe’s wants.
About half of the Russian state’s revenue comes from the sale of oil and fuel to the globe, so cutting this link would surely have an impact and add teeth to the sanctions package, but is some thing that Germany just cannot countenance offered its dependence on Russia as a supply of energy. In the United kingdom, whilst we generate considerably of our personal fuel, our shortfall requirement is mainly created up of a blend of imports from Norway and immediately shipped in liquid organic gasoline or LNG. Higher worldwide fuel rates could have an effect on our bills, but our provide is not directly dependent on Russia.
But one sector that will definitely be affected is fiscal companies. HSBC and Barclays both services Russian corporate and investment banking customers and it looks that the up coming round of sanctions will prohibit Russian banks from financing themselves, by means of bond or share sales, in Europe. Of course the hope is that this will indirectly squeeze Russian banks’ capacity to extend credit domestically – but this will consider time.
And then there is the London Stock Exchange. The LSE was symbolic of the push in the mid-noughties to court Russian company and efficiently persuaded many dozen Russian companies to record on the London market place. At the final count there had been some 60 this kind of firms listed in London. Just as the share of United kingdom exports heading to Russia has steadily enhanced more than the previous decade, so financial companies firms have sought to aid finance this growth.
Lastly, and no doubt surprising to numerous, might be the extent of some personal British companies’ publicity to Russia. Marks & Spencer can make about 4pc of its operating profits in Russia. It has 41 shops across the country, like 1 as far east as Krasnoyarsk, a city with a population of close to a million individuals about 2,600 miles to the east of Moscow. WH Smith final yr won a contract to sell newspapers in Russian railway stations. These days it has just one particular concession operational, but has been planning for much more.
Several London-listed international consumer products organizations have operations that lengthen into Russia, including SAB Miller, by way of a subsidiary investment, and Unilever.
What ever happens nevertheless, we never require to fret about our vodka. Stolichnaya is manufactured in Latvia and Smirnoff is manufactured proper here in Britain. A bit like any hangover, an escalation of sanctions on Russia is, for the Uk, a difficulty for tomorrow.
Matthew Beesley is head of international equities at Henderson