Why France Inc. Is Still Going to Putin's Economic Summit

Électricité de France's Proglio at last year's St. Petersburg International Economic Forum Photograph by Andrey Rudakov/Bloomberg

U.S. corporate chieftains are scrambling to bail out of Russian President Vladimir Putin’s St. Petersburg economic summit this month. Their French counterparts are staying on board.

France plans to send more chief executive officers to the May 22-24 event than any other country, according to a participant list (PDF) updated on May 6. The roster includes the heads of seven major French companies, from oil giant Total to yogurt maker Danone. “Our plans have not changed,” says a spokesman for electrical equipment-maker Schneider, whose chief executive, Jean-Pascal Tricoire, is one of those scheduled to attend. “Russia is our fourth-largest market.”

While Germany’s strong economic ties with Russia are well-known, France has quietly become the No. 2 foreign investor in Russia (up from ninth place in 2008), according to Emmanuel Quidet, president of the Franco-Russian Chamber of Commerce in Moscow. Quidet says current French investment totals about €12 billion ($16.7 billion).

The heads of only three major German companies are shown on the RSVP list: utility E.ON, retailer Metro, and tourism group TUI. Current German investment in Russia totals about €20 billion, according to the Committee on Eastern European Economic Relations, a group representing German business interests in the region.

France Inc. is already getting hit by Russia’s slide into recession. Paris-based Société Générale, one of the biggest foreign banks operating in Russia, reported a surprise 13 percent profit decline on Wednesday after taking a €545 million writedown on its Russian business. The slumping ruble has hurt Danone, now Russia’s biggest dairy company, by pushing up milk prices.

What really spooks the French, though, is the prospect that the West will slap economic sanctions on Moscow, triggering retaliation against foreign interests in Russia. Retaliation could have “terrible consequences,” Quidet told the French magazine Challenges in a recent interview. He estimates that 1,200 French companies do business in Russia.

France is, in many respects, the most vulnerable of Russia’s leading trade and investment partners, which also include Sweden and the Netherlands. The French economy is stagnant and unemployment is at 10.4 percent, more than twice the level in Germany.

Companies with major Russian holdings cut a wide swath across the French economy. Some examples:

• Renault owns Russia’s biggest car producer.
Auchan, Russia’s biggest foreign-owned supermarket operator, has more than 200 supermarkets in the country.
• Alstom owns 25 percent of Transmashholding, the biggest rail-equipment maker in Russia. (Although Alstom is enmeshed in a takeover battle at home, the company confirms that its chief executive, Patrick Kron, will attend the St. Petersburg meeting.)

The French government could take a direct hit from sanctions, too. Its state-owned naval shipbuilder, DCNS, has a $1.7 billion contract to build two Mistral helicopter carriers for the Russian navy. French Foreign Minister Laurent Fabius has said France “could envisage” blocking the sale but won’t make a decision until next fall. State-owned utility Electricité de France is part of a consortium building the South Stream pipeline with Russian gas export monopoly Gazprom. EDF confirms that its boss, Henri Proglio, will attend the St. Petersburg conference.

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