Londongrad Threatened by Sanctions

London is a hub for M&A activity involving Russian companies; many there are nervous about sanctions likely to come out of the dispute over Crimea.

Russian companies have made $180 billion in deals globally in the past two years, providing steady profits to London bankers, lawyers, and image crafters as the city has become a hub for such transactions. Sanctions planned by the U.S. and European Union threaten that business.

The potential fallout highlights the web of connections linking Russia to the global financial system. Since many large Russian companies are controlled by the state or by billionaires with close ties to President Vladimir Putin, even narrowly targeted sanctions could hurt their global operations.

The high-water mark of Russian dealmaking came in 2012, when London bankers and lawyers shepherded the TNK-BP transaction. That deal included a $28 billion sale of shares by AAR, a consortium of Russian businessmen, and left BP Plc with a 20 percent stake in state-controlled OAO Rosneft, worth about $13 billion.

Rosneft’s chief executive officer, Igor Sechin, may be among officials eventually targeted by an EU travel ban, Germany’s Bild newspaper reported March 15. Rosneft spokesman Mikhail Leontiev called any discussion of sanctions “hypothetical.” In an email, he wrote that “even if this kind of restriction on entry is introduced, it will be a bigger blow to the Western partners’ interests than to the Russians’.”

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