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The Battle for Trade Sanctions Against Russia

Companies / GeoPolitics Sep 07, 2014 - 12:56 PM GMT

By: Investment_U


Tom Sandford writes: Would you like “despise” with that?

Like a delicate slice of cheese between two meat patties in a Big Mac, American and European companies in Russia are watching as trade sanctions take a bite out of business.

It’s hard to believe both countries enjoyed more than $37 billion in 2011. But as sanctions tighten the trade industry, it’s clear that Russia isn’t the only one affected. At least, according to Secretary of Staff John Kerry.

He says putting too much pressure on Russian banking, mining and energy could affect America’s economy, as well.

“If you start going down that road, it’s not just them who feel it, we’ll feel it too,” Kerry told a U.S. Senate committee earlier this month.

To keep your portfolio from reeling, watch out for these sanction-prone stocks.

Western Symbols Suffer

While the McDonald’s Corp. (NYSE: MCD) flag isn’t a country’s colors, it may as well be Old Glory in the eyes of Russian revenge mongers.

The $92.54 billion chain, though run by locals, has fallen under increased scrutiny by Russian regulators.

According to Russian state-owned media, officials have already halted operations at some Russian McDonald’s. A fifth closure last Tuesday indicated that Russia may have launched inspections of the company chain in retaliation for sanctions.

Currently, the chain maintains about 430 restaurants in Russia. That may sound large, but McDonald’s operates more than 13,500 stores across 119 countries.

Meanwhile, The Wendy’s Company (Nasdaq: WEN) decided to pull out of the country completely.

Even global brands that aren’t typically viewed as Western have been hit hard by sanctions, including Adidas AG (OTC: ADDYY). In late July, the athleticwear maker with $14.36 billion in revenue said it would close some Russian stores, causing stock to drop 14%.

Oil’s Slippery Slope

One of the sanctions’ biggest victims is Britain’s BP plc (NYSE: BP). The company maintains a 20% stake in Russia’s largest oil company, Rosneft. This exposes the British oil producer to further sanctions.

Unlike McDonald’s, BP derives a larger portion of profit from Russia - around 15%. During the first six months of 2014, BP made $1.6 billion off Rosneft investments, followed by $700 million in July.

Exxon Mobil Corporation (NYSE: XOM) and Total SA (NYSE: TOT) also have troubling investments in the region.

Invest in the Rest

Until the U.S. and Europe loosen sanctions, look to companies that don’t have a vested stake in Russia and petroleum companies that are expanding toward the West, including Anadarko Petroleum (NYSE: APC). The company has upped profits by sticking to the Americas.

It claims large swaths of crude along the Gulf of Mexico and Denver Basin. What’s more, the company reached a new 52-week high on Tuesday, with shares reaching $113.51.

That’s worth at least a few Big Macs, no?


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