The last six months has been a torrid time for Russia’s business and companies operating there, but the worst could be yet to come.
“We will see a much worse time in Russia. A lot of mistakes have been made. It will maybe be over by September,” Oleg Deripaska, president of aluminium giant Rusal and one of the best-known business figures in Russia.
Economic sanctions imposed by Western countries against Russia, following the outbreak of conflict within Ukraine, combined with the falling price of oil and gas and a tumbling ruble, have helped send the country into economic turmoil. While there is a substantial Russian presence at Davos, it is less high-profile than in previous years.
Western goods have become much more expensive for Russian consumers, dampening previous growth for Western companies in the market.
“Russia is going to be a sour spot in 2015. We’re seeing a more-than 20 percent decrease in the Russian market. But the potential for Russia is here – it will just take some time to recover,” Carlos Ghosn, chairman and chief executive of car maker Renault-Nissan.
There has also been a lack of external investment in Russia, as Western companies are concerned that they may fall foul of current or future sanctions.
“It’s not directly affecting our business. There are issues with sales,” Dmitry Konov, chief executive of SIBUR, the Russian gas processing company part-owned by Gennady Timchenko, who is on the list of individuals targeted by U.S. sanctions. SIBUR itself has not been targeted as Timchenko’s stake is less than 50 percent.
There are concerns Russian businesses with loans from outside the country will find them more expensive to repay following the devaluation of the rouble.
“Russia is in a stage of accelerated deleveraging, but Russia cannot effectively access international markets, and banks cannot refinance themselves,” Konov warned.
One company which is planning to access Western capital markets next year is internet retailer Ulmart.
The retailer is “50/50” torn between London and New York for an initial public offering slated for late this year or “probably next”, Dmitry Kostygin, chief executive of Ulmart.