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The approach to cut off ties by foreign companies with Russia is a complementary move to the concerted efforts by global leaders to put Russia in a very tight economic corner.
The Swedish multinational manufacturing group Volvo AB (STO: VOLV-B) has announced it will be halting its truck manufacturing activities in Russia, while also cutting off sales to the region. As reported by Reuters, the company’s move is essentially based on the Russian invasion of Ukraine, and the measures apply indefinitely.
While accounting for just about 3% of the company’s sales, Russia is a very important business region for Volvo Group, with a functional production facility in the country. The production halt in Russia also implies that raw materials supply
“We now have a bit more clarity on sanctions and security in the region… this means all operations in Russia end,” a company spokesperson told Reuters.
No lay-off has been announced for employees in the country with the company affirming that nothing will happen to the staff in the short term. Volvo Group has joined a group of companies that are severing ties with Russia in response to President Vladimir Putin ordering an offensive on Ukraine last week.
First, FlexPool, one of the largest Ethereum mining pools announced last week that it has cut its services to its Russian customers as it sought to join the fight against the worsening diplomatic ties many perceive is being fueled by Russia. British Energy BP Plc is also amongst the global companies that have deliberately cut its association with Russia. BP sold its stake in Rosneft oil company, owned by the Russian government, a move that put an end to close to 30 years of active business partnership between both companies.
The approach to cut off ties by foreign companies with Russia is a complementary move to the concerted efforts by global leaders to put Russia in a very tight economic corner that will make the country tone down its perceived aggression on Ukraine.
Volvo Group Production Halt: How Far Is Too Far?
The economic outlook of the Russian government has continued to look bleak with sanctions flying around from key organizations. While the Volvo Group’s production halt in the region will affect just a few of Russian citizens, the company’s presence in the country has accounted for one of its robust breakthroughs as far as international collaboration is concerned.
With major financial institutions currently being cut off from the SWIFT Network, as one of the sanctions from the European Union, the United Kingdom, and the United States of America, Russians are billed to face major economic isolation in the next weeks or months. The Russian Ruble is already on a downward trend following these sanctions, and the question remains, how far is too far in this period of economic uncertainty.
While delegations from Ukraine and Russia are meeting at the border to negotiate, it is yet unclear how speedily the sanctions already pronounced will be scaled back by the relevant bodies.