Market Loop - The EU (sort of) bans Russian oil

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1st June 2022

Bite-sized business news from the UK and beyond

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Today's stories

The EU (sort of) bans Russian oil
Unilever adds activist investor to board

RUSSIA
The EU (sort of) bans Russian oil

What happened?
As part of the ramp up in sanctions against Russia, EU leaders reached an agreement to ban Russian oil imports by the end of 2022…with exceptions.

Catch up: 27% of the EU’s oil imports come from Russia, leaving the bloc between a rock and a hard place as the war in Ukraine escalated—leaders denounced Russia’s actions through aggressive sanctions, while continuing to prop up the country’s economy by spending ~$23bn per month on its crude.

The UK gets 8% of its gas from Russia and plans to reduce this to zero by the end of the year.

What’s been agreed
The EU will ban Russian oil transported by tankers (accounting for two-thirds of the EU’s Russian oil imports) but will still allow pipeline delivery for nations most heavily dependent on Russian oil, such as Germany, Slovakia, the Czech Republic and Hungary.

All nations covered by the exemption are committed to ending their reliance on Russian oil in the coming years except Hungary, whose Prime Minister remains in staunch opposition to the ban and maintains close ties with Russia.

The announcement sent oil prices higher with a barrel of crude hitting $123 yesterday - its highest since March. Average UK petrol prices also reached a new record high of 173.02p a litre.

Yes, but: Russia still supplies 40% of the EU gas and there are no plans to end this however the construction of new gas pipeline from Russia to Germany have been put on hold.

So will any of this work?
The Russian economy is expected to shrink by 10% this year and inflation is set to skyrocket as the raft of sanctions bite.

Over time, these sanctions will likely make it harder for Russia to produce everyday items like food and cars as well as equip its army and finance a war. But there remains a lot of doubt over whether this will be enough to change President Putin’s mind.

Other stories to keep you in the loop

Mortgage borrowing falls by 36% as housing market starts to cool
Civil service pauses fast-track graduate scheme to cut staff numbers
Government announce audit overhaul to help restore trust in big business
Primark executive regrets this autumn's price rises
British pound 'at risk', according to Bank of America
Retailer B&M shares slide as CEO prepares for exit

CONSUMER
Unilever adds activist investor to board

What happened?
Yesterday Unilever, the maker of dozens of consumer goods including Marmite, Dove soap and PG Tips, announced that the investor Nelson Peltz had joined the board. Trian Fund Management, founded and run by Peltz, has built a 1.5% stake in the consumer goods giant making it the fourth biggest shareholder.

Who is Nelson Peltz?
Peltz is a billionaire hedge fund manager and last month became Brooklyn Beckham’s father-in-law, after his daughter Nicole wed the son of David and Victoria Beckham.

Aside from his celebrity connections, Peltz is the CEO of Trian which has invested in several multinational companies including PepsiCo, General Electric and the British investment firm Janus Henderson.

Trian is known for engaging in shareholder activism, meaning it buys shares in companies to influence how they are run, with joining the board of directors a key way of doing this.

Unilever has had a bumpy year so far
In January it lost out on buying GlaxoSmithKline’s consumer business for £50bn and was publicly chastised by investors for poor management.

In recent years it's faced growing pressure from shareholders after missing sales and profit targets, and its shares have lagged behind those of its peers.

Earlier this year it announced that it would remove 1,500 managers to simplify its organisational structure in a bid to show investors that the company is on the right track despite the GlaxoSmithKline fail.

What will Nelson Peltz do for Unilever
He will sit on Unilever’s compensation committee meaning he’ll have a say on the CEO’s pay. He’s also pledged to help boost the company’s strategy, operations, sustainability and shareholder value.

Investors reacted positively to the news with Unilever shares jumping 9% yesterday, making it the biggest riser on the FTSE 100. It comes after months of the stock underperforming compared to the index.

Stat of the day

Brits spend £1.8bn a year on unwanted consumer subscriptions or around £60 per household

Interesting links from around the web

What your profile picture says about your personality
Why you should never bid a round number when negotiating a price
These 10 companies help pay for their employees’ holidays

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Market Loop - The EU (sort of) bans Russian oil

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