When Russia attacked Ukraine, international companies did not take long to respond, some announcing that they will leave Russia immediately, others reducing imports or new investments. Multi-billion-dollar factories, power plants and power plants were shut down or sold, along with fierce criticism of the war and pro-Ukraine rhetoric.
A year later, it is clear: Leaving Russia was not as easy as the first announcements would have made it seem.
Increasingly, Russia has put obstacles in the way of companies seeking to exit, requiring approval by a government committee and in some cases by President Vladimir Putin himself, while imposing harsh discounts and rebates. taxes at retail prices.
Although the company’s narratives vary, one point is that it wants to put a barrier between Western sanctions and public opinion that is outraged on the one hand by Russia’s efforts to weaken and punish the other. Some international brands such as Coke and Apple are entering illegally through third countries even though they have decided to leave.
Most companies are informal, sometimes specifying responsibility for shareholders or employees or legal responsibility for franchisees or partners. Others claim to provide basic necessities such as food, agriculture or medicine. Others say nothing.
One is the Italian retailer Benetton, whose Moscow store now called Evropeisky Mall – meaning “European” in Russian – was busy on a weekday evening, with customers browsing and employees sorting through piles of brightly colored clothes. At Italian underwear retailer Calzedonia, shoppers looked for socks and swimwear. Neither company responded to emailed questions.
For shoppers in Moscow, what they can buy hasn’t changed much. While the Mothercare baby store became Mother Bear under new common ownership, most of the products in the Evropeisky Mall store still carry the Mothercare brand.
This is what student Alik Petrosyan saw while shopping at Maag, who now owns the former Zara fashion store in Moscow.
The quality has not changed at all, everything has remained the same.” “The prices have not changed much considering the inflation and the situation last year.”
“Overall Zara – Maag – had competition,” said Petrosyan, correcting himself, “but I can’t say that there are others who can compete with them on the same level. Because the remaining competitors are at a higher price, but the quality does not match.”
The initial move to Russia was led by major automotive, oil, technology and professional services companies, with BP, Shell, ExxonMobil and Equinor completing deals or signing billions in deals. McDonald’s sold its 850 restaurants to a private retailer, while France’s Renault took a symbolic one ruble for its stake in Avtovaz, Russia’s biggest carmaker.
Since the first takeoff, new groups have emerged: companies that are biding their time, those that are struggling to dispose of assets and others that are experimenting with business as usual. More than 1,000 international companies have publicly announced that they are voluntarily reducing business in Russia beyond what is required by the sanctions, according to a Yale University database.
But the Kremlin only increases the requirements, most recently a “volunteer” tax of 10% directly from the government, and the understanding that companies can sell at a price of 50%.
Putin recently announced that the government would seize the assets of the Finnish energy company Fortum and the German Uniper utility, banning the sale with an eye to ending any Western seizure of Russian goods.
Danish brewer Carlsberg announced plans to exit its Russian business – one of Russia’s largest brewers – in March 2022 but has faced difficulties explaining the impact of sanctions and finding the right buyers.
“This is very difficult, and it has taken longer than we expected” but now “it is almost over,” said Tanja Frederiksen, global head of external communications.
He called the Russian business the most integrated part of Carlsberg. The separation has affected all aspects of the company and more than 100 million Danish kroner ($14.8 million) in sales of new brewing equipment and IT infrastructure, Frederiksen said.
Another beer giant, Anheuser-Busch InBev, is trying to sell part of a Russian joint venture to its Turkish partner Anadolu Efes and has withdrawn its investment.
Companies are lost in the “Bermuda Triangle between EU sanctions, US sanctions and Russian sanctions,” said Michael Harms, executive director of the German Eastern Business Association.
They have to find a friend who is not allowed by the Europeans. In Russia, big businesses are often people “close to the government,” Harms said. I don’t like – people who are close to the government.”
The 10% export tax imposed by Russia is extremely difficult. American companies must obtain permission from the Treasury Department to pay or face US sanctions, said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin.
Hundreds of companies quietly decided not to leave.
In an unusual statement, Steffen Greubel, CEO of the German company Metro AG, said at this year’s shareholder meeting that the company condemns the war “without s, ands or buts.”
However, the remaining decision was motivated by the position of 10,000 local workers and “is intended to preserve the value of the company for its shareholders,” he said.
Metro gets about 10% of its annual sales from Russia – more than 2.9 billion euros ($3.1 billion).
Meanwhile, the shelves are as full as before the war at Globus superstores, a German chain with 20 stores operating in Moscow.
A closer look shows that most of the Western brands of beer are out of stock, and most of the jewelry has dropped in price by 50% to 70%. There are many sites from Russia and Belarus, which cost less. Procter & Gamble’s products are still plentiful – even after the company left Russia.
Globus has said it has “severely cut” new funding but has kept its stores open to serving food to the public, noting that food has not been approved and citing “the risk of expropriation through national coercion and the serious consequences of the criminal law for our local authorities.”
Similarly, Germany’s Bayer AG, which supplies pharmaceuticals, agricultural chemicals and seeds, says doing business in Russia is a good idea.
“Depriving civilians of essential health and agricultural services – such as cancer or heart treatment, medicines for pregnant women and children and crops for growing food – would only increase the impact of war on people’s lives,” the company said. words.
Jeffrey Sonnenfeld, the head of the Yale database, said that leaving is the only business idea, citing research that shows the company’s prices rise after that.
“Companies that exited were rewarded for quitting,” he said.
Marianna Fotaki, professor of business ethics at Warwick Business School, says business is “not the most important part. … You don’t want to be associated with the criminal regime.”
Even if the competitors remain, he said, “tracking speed to the bottom” is not the answer.
This article has been edited to show that the name of the subject in the Yale database is not misspelled. He is Jeffrey Sonnenfeld, not Jeffrey Sonnenberger.