One year after the destruction of Ukraine, it is clear: Leaving Russia was not as easy as the first announcements would have made it seem for international companies.
Although the company’s stories vary, one point is necessary to connect the Western sanctions and the sentiments of the people angry on the one hand with Russia’s efforts to weaken and punish other people.
Some international brands, such as Coke and Apple, continue to enter third countries illegally despite the unions’ decision to leave.
For shoppers in Moscow, what they can buy hasn’t changed much. While Mothercare’s children’s store became Mother Bear under new common ownership, most of the products in the Evropeisky Mall store in Moscow 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 behavior has not changed at all, everything has remained the same,” he said. “Prices have not changed much, taking into account inflation and economic events that took place last year.”
The Kremlin responded with a withdrawal tax
The initial migration to Russia in the weeks after February 2022 was led by large companies in the automotive, oil, technology and professional services sectors. BP, Shell, ExxonMobil and Equinor have terminated joint ventures or lost billions. McDonald’s sold its 850 restaurants to a local lender, while France’s Renault took a symbolic ruble off its stake in Avtovaz, Russia’s biggest carmaker.
Since his first departure, some companies have struggled to shed assets and others trying to do business as usual, sometimes specifying responsibility for owners or employees, or legal responsibility for franchisees or partners. Others claim to provide basic necessities such as food, agriculture or medicine.
The Kremlin continues to increase requirements, most recently a “voluntary” tax of 10 percent directly to the government, and an understanding that companies can sell at a 50 percent discount.
Russian President Vladimir Putin recently announced that the government would seize the assets of the Finnish energy company Fortum and the German utility Uniper, banning the sale with an eye to stop any Western moves to confiscate Russian goods abroad.
More than 1,000 international companies have publicly announced that they are voluntarily cutting back on Russian businesses beyond what is required by the sanctions, according to database created by Yale University.
Yale’s Jeffrey Sonnenfeld said leaving is the only legitimate business decision, citing research showing corporate rates rise afterward.
“Companies that came out were rewarded for coming out,” he said. “It is not good for shareholders to cooperate with Putin’s war machine.”
Leaving the ‘hard way’
Danish brewer Carlsberg announced its intention 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 originally expected,” said Tanja Frederiksen, global head of external communications, adding that it is “almost over” now.
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 ($19.6 million Cdn) in the sale of new brewing equipment and IT infrastructure, Frederiksen said.
SEE | The consequences of the sanctions in Russia seem different:
Russian President Vladimir Putin has boasted that Western sanctions have failed to slow the economy, but experts say the effects are beginning to show and that the effects will become more apparent as the year progresses.
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.
Opposition to sanctions
Companies are lost in the “Bermuda Triangle between EU sanctions, US sanctions and Russian sanctions,” said Michael Harms, head of the German Eastern Business Association.
He had to find a partner who wasn’t allowed by West, Harms said.
In Russia, big businesses are often people who are “well connected to the government,” Harms said. “First, they have to sell at a very low price or almost give away goods, and then they go to people we don’t like politically – people who are close to the government.”
The 10 percent export tax imposed by Russia is a serious problem. 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 a rare statement, Steffen Greubel, CEO of German finance and logistics at Metro AG, said at a shareholder meeting this year that the company opposes the war “without ifs, ands or buts.”
However, the decision to stay was motivated by the responsibility of the 10,000 local workers and “in order to preserve the value of the company for its shareholders,” he said.
Germany’s Bayer AG, a supplier of pharmaceuticals, agricultural chemicals and seeds, says doing business in Russia is a good idea.
“Withholding essential medical care and agricultural products for civilians – such as cancer or heart treatment, medicine 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.
Meanwhile, the shelves are as full as before the war at Globus superstores, a German chain with 20 stores operating in Moscow.
Globus said it had made “significant cuts” in new funding but had kept its stores open to ensure people had access to food, noting that food was not allowed.