The sanctions placed on Russia by both Europe and the US over the past few weeks have been designed to hurt the Russian economy. However, western companies are now starting to become concerned that the sanctions could impact their business within the region.
Both ITE Group (LSE: ITE) and BP (LSE: BP) (NYSE: BP.US) are the most exposed, but should investors be worried?
Russia-dependant 
ITE organises exhibitions and conferences around the world but the company generates around 60% of its sales within Russia and 5% within Ukraine — that’s around 65% of the company’s business at risk.
Unfortunately, it appears as if the situation within Eastern Europe is already having an impact on ITE’s business. Indeed, the company released a trading statement earlier this month, which revealed that revenues in the three-month period to 30 June 2014 had fallen by nearly 25% year on year.
Now, for the most part lower revenues reflected the absence this year of the biennial Moscow International Oil & Gas Exhibition. However, management warned that the situation within Ukraine was hurting group revenues within the country. ITE’s management did state that they were confident in the company’s outlook for the rest of the year.
Still, what we don’t know is how much of an effect the current cooling of relations between the West and Russia, will have on ITE’s long term business prospects.
A key partner 
A key part of BP’s business is its near 20% share of Russian oil giant Rosneft. Unfortunately, the US has already placed specific sanctions on Rosneft, imposing tight restrictions on lending to Rosneft by US entities.
Rosneft plays a large part in BP’s global business plan, as the British oil giant receives both dividends and a proportion of profits from Rosneft. In total, Rosneft contributed over $1bn to BP’s underlying $3.6bn second-quarter earnings.
However, what’s really worrying for BP is the threat that Russia will seize the assets of British companies, including BP and peer Shell as a retaliation against tough sanctions. A move by the Russian government to nationalise BP’s interest in Rosneft will cost the company billions.
Long term effects
With BP’s international operations, it is likely that over the long term, the company will recover from any costs incurred, or fall in income from the company’s Rosneft holding; ITE may not be so lucky.
Indeed, with over 65% of its sales taking place within Eastern Europe, ITE could see its business wiped out overnight if things take a turn for the worst.
