Russia blocks Facebook, passes ‘fake news’ law; Microsoft, EA halt sales

Customers shop in IKEA store in Omsk
Customers shop at an IKEA store in Omsk, Russia, March 3, 2022. REUTERS/Stringer

March 4, 2022

By Elizabeth Culliford and Kate Holton

(Reuters) -Russia said it would block Facebook for blocking state media and Britain’s BBC stopped reporting in the country in the face of a new media law as Moscow on Friday raised the stakes for foreign corporations over its attack on Ukraine.

Internet provider Cogent said it would terminate services to Russia, potentially deepening the country’s isolation.

Microsoft said it was suspending sales in Russia and video game maker Electronic Arts, which had removed Russian teams from popular games, said it was stopping sales of games in Russia and ally Belarus.

Russia said that Meta Platform’s Facebook was being blocked for restricting state-backed channels, and it also blocked websites of the BBC, Deutsche Welle and Voice of America for what it said was false information about the war in Ukraine.

The BBC said it would temporarily suspend its work in Russia after introduction of a new law that could jail anyone found to be intentionally spreading “fake” news.

The actions by Moscow come after a week of censure by major global brands for the attack on Ukraine. Shipping and supply chain issues have made it difficult to work in Russia, as well. Companies form Shell to Apple to Toyota have taken actions from stopping sales and operations to exiting completely.

Moscow laid out options for foreign companies on Friday: stay in the country, exit entirely or hand over their holdings to local managers until they return.

First Deputy Prime Minister Andrei Belousov described the alternatives in a statement.

“The company continues to work fully in Russia,” he said in a statement. “Foreign shareholders transfer their share to be managed by Russian partners and can return to the market later,” he added, and: “The company permanently terminates operations in Russia, closes production and dismisses employees.”

No route comes without risks. Those staying could face a backlash in Western markets where the public have rallied to Ukraine’s cause, those transferring shares could be handing over the keys with few guarantees, while those quitting may face a big loss at best, or might have to sell for a nominal sum.

“It’s a complicated process,” said Darren Woods, chief executive of U.S. energy giant Exxon Mobil which is exiting oil and gas investments that involve partnerships with Russia’s Rosneft and others worth $4 billion.

Companies have had little time to prepare.

Russia’s invasion – which Moscow calls a “special operation” – prompted the United States and Europe to impose swift and sweeping sanctions, affecting everything from global payments systems to a range of hi-tech products.

“Western companies probably haven’t lost so much money so quickly due to geopolitics since the Shah was overthrown in Iran,” said Renaissance Capital chief economist Charlie Robertson, referring to the Islamic revolution more than four decades ago that led to an exodus of Western businesses.

STAYING PUT

Yet some companies plan to keep going. Italian tyre maker Pirelli said it had set up a “crisis committee” to monitor developments but did not expect to halt production at either of its two Russian plants.

Its rival, Finland’s Nokian Tyres, said last week it was shifting production of some product lines out of Russia.

But there are no easy fixes even for those looking for an exit when there are limited trading counterparties.

British insurer and asset manager Royal London said it planned to sell its Russian assets, which it said only accounted for about 0.1% of its portfolio.

“We can’t trade these things anyway, but as soon as we can, we obviously intend to divest,” Chief Executive Barry O’Dwyer said.

For companies packing up, the Russian first deputy prime minister said a fast-track bankruptcy plan “will support the employment and social well-being of citizens so that bona fide entrepreneurs can ensure the effective functioning of business.”

‘EXTREME SCENARIO’

So far global companies, banks and investors have announced they have exposure in some form to Russia of more than $110 billion. That number could rise. Data from research firm Morningstar shows exposure from international funds to the tune of $60 billion in stocks and bonds.

BASF, the world’s largest chemicals group, said it was halting new business in Russia and Belarus, except for food production for humanitarian causes. It also hinted at the minefield of new rules sanctions have introduced.

“BASF will only conduct business in Russia and Belarus that fulfils existing obligations in accordance with applicable laws, regulations and international rules,” it said.

Swiss food giant Nestle, maker of KitKat bars and Nescafe coffee, said it was halting advertising in Russia, while Swiss watchmaker Swatch Group said it would continue its operations in Russia but would put exports on hold.

Deutsche Bank said it had been stress-testing its operations given it has a big technology centre in Russia but was assured it could run its everyday business globally.

The German lender had opened a new office in Moscow in December, a move it said at the time represented “a significant investment and commitment to the Russian market.”

(Sabrina Valle in Houston; Giulio Piovaccari in Milan, Toby Sterling in Amsterdam, Silke Koltrowitz in Zurich, John Revill in Zurich, Tom Sims and Frank Siebelt in Frankfurt, Richa Naidu in London; Diane Bartz in Washington; Elizabeth Culliford in New York and Tiyashi Datta and Eva Mathews in Bangalore; Writing by Edmund Blair and Peter Henderson; Editing by Pravin Char and Nick Zieminski)

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