Companies around the world reacted quickly to Russia’s invasion of Ukraine. get out of Russia immediatelyOthers curtailed imports or new investments. The sale or write-off of energy holdings, power plants, and factories worth billions of dollars was accompanied by a fierce condemnation of war and expressions solidarity with Ukraine.
More than a year later, it’s clear: Leaving Russia was not as simple It was not as bad as it first appeared.
Russia is increasingly putting obstacles in the way for companies who want to leave. They require approval from a government committee and, in some cases, President Vladimir Putin, and impose painful discounts and taxes.
Though companies’ stories vary, a common theme is having to thread an obstacle course between Western sanctions and outraged public opinion on one side and Russia’s efforts to discourage and penalize departures on the other. Some international brands, such as Coke or Apple, are trickling in informally through third countries despite a decision to exit.
Many companies are simply staying putSome cite their responsibility towards shareholders, employees or local franchisees and partners. Some claim that they are providing necessities like food, farm products or medicine. Others say nothing.
One is Italian fashion chain Benetton, whose store at Moscow’s now ironically named Evropeisky Mall — meaning “European” in Russian — was busy on a recent weekday evening, with customers browsing and workers tidying piles of brightly colored clothing. Shoppers at the Italian lingerie retailer Calzedonia browsed through swimwear and socks. Emails sent to both companies were not answered.
Consumers in Moscow can now buy a product. what they can buy hasn’t changed much. Mothercare, the baby products shop in Evropeisky Shopping Mall has been renamed Mother Bear by its new owners. However, the majority of items still carry the Mothercare label.
Alik Petrosyan also saw this when he was shopping at Maag in Moscow. Maag is now the owner of Zara’s old flagship clothing store.
“The quality hasn’t changed at all, everything has stayed the same,” he said. “The prices haven’t changed much, taking into account the inflation and the economic scenarios that happened last year.”
“Overall Zara — Maag — had competitors,” Petrosyan said, correcting himself, “but I wouldn’t say that there are any now with whom they could compete equally. Because the competitors who stayed are in a higher price segment, but the quality doesn’t match up.”
The initial exodus out of Russia was led primarily by large automakers, oil companies, technology and professional service firms, BP, ShellExxonMobil & Equinor have terminated joint ventures and written off billions in stakes. McDonald’s sold its 850 restaurants A local franchisee, while France’s Renault took a symbolic single ruble for its majority stake in Avtovaz, Russia’s largest carmaker.
In the wake of the initial departures, there are now new categories: companies who are waiting, those struggling to get rid of assets, etc. attempting business as usual. Over 1,000 international companies have publicly said they are voluntary curtailing Russian business beyond what’s required by sanctions, according to a database by Yale University.
But the Kremlin keeps adding requirements, recently a “voluntary” 10% departure tax directly to the government, plus an understanding that companies would sell at a 50% discount.
Putin recently announced the government would be moving to a new location. take over the assets of Finnish energy company Fortum and Germany’s Uniper utility, barring a sale with an eye to offsetting any Western moves to seize more Russian assets abroad.
Danish brewer Carlsberg announced its intention to divest its Russia business — one of Russia’s largest brewing operations — in March 2022 but faced complications clarifying the impact of sanctions and finding suitable buyers.
“This is a complex process, and it has taken longer than we originally hoped for” but now is “almost completed,” said Tanja Frederiksen, global head of external communications.
She said that the Carlsberg Russia business is a very integrated part. Frederiksen stated that the separation of this business involved all parts within Carlsberg and cost more than 100 millions Danish Kroners ($14.8 Million) in investments in new brewing technology and IT infrastructure.
Anheuser-Busch InBev is another beer giant that has given up revenue and tried to sell its stake in Anadolu Efes, a Turkish partner, a Russian joint-venture.
Companies are lost in “a Bermuda Triangle between EU sanctions, U.S. sanctions and Russia sanctions,” said Michael Harms, executive director of the German Eastern Business Association.
They need to find a partner who is not sanctioned in the West. In Russia, major business figures are often people who are “well connected with the government,” Harms said. “For one thing, they have to sell at a large discount or almost give assets away, and then they go to people whom politically we don’t like — people who are close to the regime.”
The 10% Russian exit tax is a particularly complicated issue. American companies will need to obtain permission from the Treasury Department before paying it, or they may be in violation of U.S. Sanctions, according to Maria Shagina, an expert on sanctions at the International Institute for Strategic Studies, Berlin.
Hundreds have quietly decided to remain.
In a rare, frank explanation, Steffen Greubel, CEO of German cash and carry firm Metro AG, said at this year’s shareholder meeting that the company condemns the war “without any ifs, ands or buts.”
However, the decision to stay was motivated by a responsibility for 10,000 local employees and is “also in the interest of preserving the value of this company for its shareholders,” he said.
Metro gets around 10% of its annual sales from Russia — more than 2.9 billion euros ($3.1 billion).
Globus, a German-based chain that operates 20 stores in Moscow, has shelves just as full as they were before the war.
If you look closely, it is clear that many Western beer brands are no longer available and the prices of cosmetics have increased by up to 70%. More vegetables are available from Russia and Belarus at a lower price. Procter & Gamble products are still abundant — despite the company’s withdrawal from Russia.
Globus says it has “drastically” cut new investment but kept its stores open to ensure food supply for people, noting that food has not been sanctioned and citing “the threat of confiscation of considerable asset value through a forced nationalization as well as severe consequences in criminal law for our local management.”
Bayer AG of Germany, which provides agricultural chemicals, seeds and medicine, also argues that doing business in Russia makes sense.
“Withholding essential healthcare and agriculture products from the civilian populations — like cancer or cardiovascular treatments, health products for pregnant women and children as well as seeds to grow food — would only multiply the war’s ongoing toll on human life,” the company said in a statement.
Jeffrey Sonnenberger said leaving was a valid business decision. He cited research that showed company shares rose afterward.
“The companies that have pulled out have been rewarded for pulling out,” he said. “It is not good for shareholders to be associated with Putin’s war machine.”
Marianna Fotaki, professor of business ethics at Warwick Business School, says business is “not just about the bottom line. … You don’t want to be an accomplice to what is a criminal regime.”
Even if competitors stay, she said, “following the race to the bottom” is not the answer.