Russian citizens and businesses have been hit with sweeping sanctions in reaction to their country’s invasion of Ukraine last week.

The list of punitive measures has been co-ordinated by the US, UK, European Union and other countries, and is only likely to grow as the war progresses. As UK Chancellor Rishi Sunak said this week, the aim is to cut Russia off from the financial system. It's a financial war fought on many fronts, including shutting Russia out of the SWIFT payments system., and blocking its central bank from operating within the global financial infrastructure.

British MPs are expected to vote on legislation to prohibit major Russian companies from raising money in London and to stop Russia itself raising money via sovereign debt issues. According to the government, these will involve “measures to prevent Russian companies from issuing transferable securities and money market instruments in the UK.” Some MPs are even calling for Russian companies to be delisted from the London Stock Exchange.

London is a global centre of both equity and bond raising for foreign companies and governments. In the case of equities in particular, listed companies rely on corporate actions like rights issues and share placings to raise capital for expansion plans. The City of London is also a global centre for flotations and has hosted a number of IPOs by Russian companies over the years, including EN+ (ENPL) in 2017.

While delisting may be a popular move, it would be an unprecedented one. In normal times, the exchange itself would take this decision if a company failed to meet listing requirements, or was taken over by another. From a regulatory point of view, the FCA is the “listings regulator” overseeing the LSE’s actions.

The UK government has recently beefed up its powers to intervene in foreign takeovers in strategic sectors, but a forced delisting is one step beyond this. This legislation was designed to tackle “hostile actors”, with China and Russia seen as the most likely to fit that definition.

Let's look first at the main Russian companies listed on the London Stock Exchange.

Three have a direct listing, and they are FTSE 100 steelmaker Evraz (EVR), gold miner Petropavlosk (POG), and the FTSE 250’s Polymetal (POLY). Shareholder value is evaporating rapidly at these companies, with heavy daily falls seen – Evraz and Polymetal, for instance, have lost more than three quarters of their value so far this year. The UK governmet has not suggested listed Russian companies will be subject to sanctions. However, some MPs have called for an asset freeze on Chelsea Football Club owner Roman Abramovich, who has a sizeable stake in Evraz.

Then there are the Russian companies with shares classed as Global Depository Receipts (GDR) and American Depository Receipts (ADR). These allow foreign investors to buy overseas companies that are listed on their home exchanges. For example, the UK’s Shell (SHEL) is available to buy in New York as an ADR if US investors want to buy it in dollars.

Among these GDRs, VT Bank (VTBR) has have been placed under the UK sanctions regime, and its shares are currently suspended. Russian state-owned Sberbank (SBER) was added to the UK sanctions list on Monday but is still trading and has lost 99% of its value in 2022. The European Central Bank says it expects Sberbank’s European operations to fail. UK foreign secretary Liz Truss said on Monday: "We will bring in a full asset freeze on all Russian banks in days, looking to coordinate with our allies." 

As this is a fast-moving situation, our aim is to keep both these lists updated. The list of Russian companies only includes those added since 2022 started, as there are existing names already on the list. Morningstar has approached the London Stock Exchange, HM Treasury and the Foreign, Commonwealth and Development Office for comment.