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Following the beginning of conflict in Ukraine on 24 February, the European market continues to be in turmoil. The UK government’s announcement of a tranche of sanctions against Russian individuals and companies, paired with panicked investors attempting to unwind their Russian positions, has sent the shares of certain London-listed Russian companies into free-fall. On 3 March, the London Stock Exchange took the step of suspending trading in with strong Russian ties due to the ramifications of sanctions on the market.

Despite western sanctions specifically exempting the Russian energy sector, the majority Russian state-owned multinational energy corporation Gazprom and oil giant Lukoil have seen their share prices tumble 23.5% and 93.23% respectively. Russia supplies approximately 35% of the natural gas used across Europe, but the UK’s reliance on Russian natural gas is considerably lower at 3%.

A growing number of British businesses are attempting to cut ties with the Russian energy sector.  Shell announced on 28 February it plans to exit its joint ventures with Gazprom, which are valued at approximately £2bn. Shell also intends to exit its involvement in the Nord Stream 2 pipeline project, in which it holds a 10% stake. Gazprom is intimately involved in the project, providing half of the £8bn funding. In addition, BP on 27 February it was offloading its 19.75% voting stake in the Moscow headquartered Rosneft, and two senior BP executives have resigned from Rosneft’s board. On 2 March, British Gas owner, Centrica, became the latest company to announce the end of its partnership with Gazprom. In a further blow to the Kremlin-controlled company, Gazprom’s London landlord British Land announced its intention to end the former’s rental contract as soon as legally possible.

Similarly, on 2 March Russia’s biggest lender Sberbank suspended trading on the London Stock Exchange and announced in a it was withdrawing from the European market due to ‘abnormal cash outflows and threats to the safety of employees and branches’.

The Russian invasion and subsequent sanctions against Russian companies have forced businesses throughout Europe and the UK to brace for further supply chain disruption, and higher inflation. As such, we can expect to see companies hoping to pursue an IPO think twice about seeking admission to the London Stock Exchange at this time. For example, GCP Co-Living REIT on 24 February a pause in its IPO process due to the events in Ukraine, just two weeks after the publication of its .  This decision was likely taken due to the current volatility of European markets, and supply chain concerns. The closed-ended investment company has no Russian assets and intends to invest only in urban centres across the United Kingdom and Ireland.

Market Tracker will continue to monitor the situation as it develops.