MOSCOW Western investors from a bank to a brewer reported trouble in their Russian operations on Wednesday due to the Ukraine crisis, while the Kremlin suggested Washington was trying to sabotage President Vladimir Putin's flagship economic forum.
French Bank Societe Generale wrote down the value of its Russian subsidiary, Danish brewer Carlsberg blamed the ruble's weakness for lower profits, and Britain's Imperial Tobacco Plc said conditions in Russia had hurt its overall business in growth markets.
So far Western sanctions over Russia's annexation of Crimea from Ukraine in March have mainly targeted only individuals close to Putin and steered clear of trying to inflict serious damage on the economy.
Russian shares and the ruble surged on Wednesday after Putin called for separatists in eastern Ukraine to postpone a planned referendum on secession and backed diplomatic efforts to resolve the crisis.
However, capital is flooding out of Russia just as it most needs foreign investment to support a faltering economy, and analysts forecast the ruble will fall to new lows against the dollar in the coming year.
Putin's press secretary Dmitry Peskov said top U.S. executives were coming under pressure to stay away from the St Petersburg International Economic Forum later this month, at which the president is due to deliver the keynote address.
The annual investment gathering, Russia's answer to the Davos World Economic Forum, usually attracts an A list of global company bosses but the White House has said it would be inappropriate for heads of big U.S. firms to attend this year.
Chief executives conspicuous by their absence from the May 22-24 event include the heads of aluminum producer Alcoa Inc, energy firm ConocoPhillips, Citibank, General Electric and International Paper.
"As we know, many U.S. companies have faced direct unprecedented pressure... They are deciding whether to go or not to go to the forum but not on their own," Peskov told RIA news agency, adding that Putin had not altered his agenda for the forum.
The Forum aims to showcase Russia as a place to invest but has not always succeeded in persuading executives worried by red tape, corruption and poor legal protection. The battle will be particularly hard this year with the economy sinking into recession and hit by the U.S. and European Union sanctions.
Highlighting the problems of investing in Russia, and citing uncertainty over Ukraine, Societe Generale said it had booked a 525 million euro ($731 million) writedown on the value of its Russian unit, Rosbank.
Carlsberg reported a fall in first-quarter operating profit because of the ruble's weakness and poor sales in eastern Europe.
Imperial Tobacco said in a report for the six months to March 31 that its "overall share position in growth markets was slightly down, impacted by conditions in Russia". Cigarette companies are relying on growth markets, largely in developing countries, to offset dwindling sales in the developed world.
Analysts said conditions are deteriorating. "The outlook for sales and earnings in Russia and Ukraine for the rest of the year and in 2015 is worsened every day that goes by without the crisis getting solved," Morten Imsgard from Sydbank said.
MESSAGE TO PUTIN
Russia annexed Crimea after the ousting of pro-Moscow Ukrainian president Viktor Yanukovich in February, and since then the separatists have taken over several towns and cities in the largely Russian-speaking east of the country.
Western governments accuse Moscow of being behind the separatist moves in eastern Ukraine but Russia denies this.
Although the White House says it has not forced businessman to boycott the forum, President Barack Obama is sending the message that it cannot be business as usual with Russia.
White House spokesman Jay Carney said officials had been discussing the forum with business leaders, and had made clear that attending would not be appropriate given "flagrant violations of a sovereign nation's territorial integrity".
Some Russian companies and individuals have faced sanctions over the events in Ukraine, such as asset freezes and visa bans, including some of Putin's inner circle but not Putin himself.
The U.S. pressure over the forum, however, indirectly hits Putin himself. His face features on the forum's website, the event is closely associated with him personally and each year the president uses it to make a rallying cry for investment.
Russia, the world's top oil producer, needs foreign investment and know-how for the energy sector, where advanced drilling technology is needed to unlock Arctic and shale oil deposits.
GROWTH FORECASTS DOWN
The International Monetary Fund last week forecast 0.2 percent growth this year and said the economy was already "experiencing recession". Russia's credit rating was cut by Standard and Poor's last month to one notch above junk status.
The ruble is down nearly 8 percent against the dollar this year and capital flight, nearly $64 billion in the first quarter, is expected by the IMF to hit $100 billion by year-end.
Moscow has not given up on the forum but the guest list could shrink even further.
International Paper CEO John Faraci does not plan to attend, although the company plans to send other executives, a source close to the company said.
Kommersant daily newspaper said the chief executives of Goldman Sachs, Morgan Stanley, Visa and PepsiCo also may not attend.
U.S. energy giant ExxonMobil, a major partner for Rosneft, declined comment. BP, which holds an almost 20 percent stake in Rosneft, also declined to comment on the plans of chief executive Bob Dudley, a regular guest at the forum.
Reflecting doubts over the investment climate, Royal Dutch Shell, a shareholder in Russia's sole liquefied natural gas plant feeding Asian markets, has said it is unlikely to be "jumping into new investments" in the short term.
Telenor CEO Jon Fredrik Baksaas, a shareholder with Russia's
No.3 mobile phone operator Vimpelcom, told Reuters many people were waiting to see how the presidential election in Ukraine goes on May 25.
"I think if you started from scratch, it would be hard to see a Western company like Telenor doing a significant investment in Russia right now," he said.
The chief executives of Telenor, Shell and Norway's Statoil CEOs were still on the participants list as of May 6. The heads of BP and France Total are also still there.
(Additional reporting by Megan Davies, Jason Bush and Alexander Winning in Moscow, Ernest Scheyder in New York, Anna Driver in Houston, Balazs Koranyi in Oslo, editing by Nigel Stephenson and David Stamp)