Some companies say they can’t leave Russia, others find leaving difficult but worth it

More than a year after the invasion of Ukraine, it is clear. Leaving Russia was not as simple as the first announcements might seem for global companies.

While the companies’ stories vary, the common thread is to thread a needle between Western sanctions and outraged public opinion on the one hand, and Russia’s efforts to encourage and punish departures on the other.

Some international brands, such as Coke and Apple, still make informal inroads into third countries despite the corporations’ announced decisions to withdraw.

For consumers in Moscow, what they can buy hasn’t changed much. While the Mothercare children’s store became Mother Bear under new local ownership, most of the products at the Evropeisky Mall store in Moscow still carry the Mothercare brand.

Student Alik Petrosyan also saw this when he shopped at Maag, which now owns Zara’s former flagship clothing store in Moscow.

“The quality has not changed at all, everything has remained the same,” he said. “The prices have not changed much, taking into account the inflation and economic scenarios that happened last year.

The Kremlin responded with a departure tax

In the weeks leading up to February 2022, the initial exodus from Russia was led by major auto manufacturers, oil, technology and professional services companies. BP, Shell, ExxonMobil and Equinor ended joint ventures or wrote off billions in shares. McDonald’s sold its 850 restaurants to local franchisees, while France’s Renault took a symbolic one ruble for a majority stake in Avtovaz, Russia’s biggest carmaker.

Since the initial wave of departures, some companies have struggled to shed assets while others have tried to conduct business as usual, sometimes citing liability to shareholders or employees or legal obligations to local franchisees or partners. Others claim to provide basic necessities such as food, farm supplies or medicine.

A woman in a winter doll is shown walking in front of a building with clear windows and a logo.
People line up to visit a newly opened restaurant in one of the former McDonald’s stores on Bolshaya Bronnaya Street in Moscow on January 25. (AP)

The Kremlin continues to add demands, most recently a “voluntary” 10 percent departure tax directly to the government, plus an understanding that companies will sell at a 50 percent discount.

Russian President Vladimir Putin recently announced that the government would seize the assets of Finnish energy company Fortum and German utility Uniper, barring the sale, in a bid to offset any Western moves to grab more Russian assets abroad.

More than 1,000 international companies have publicly said they are voluntarily cutting Russian business outside of sanctions, according to a database compiled by Yale University.

Jeffrey Sonnenfeld of Yale said the departure was the only valid business decision, citing research showing that the company’s stock prices have since risen.

“The companies that got out were rewarded for getting out,” he said. “It is not good for shareholders to be associated with Putin’s military machine.”

Moving away from the “complicated process”

Danish brewer Carlsberg announced its intention to divest its Russian business, one of Russia’s largest brewers, in March 2022, but has faced complications in clarifying the impact of sanctions and finding suitable buyers.

“This is a complex process and it has taken longer than we originally expected,” said Tanya Frederiksen, global head of external communications, adding that it is now “almost complete.”

He called the Russian business a deeply integrated part of Carlsberg. Its spin-off involved all parts of the company and an investment of more than 100 million Danish kroner ($19.6 million) in new brewing equipment and IT infrastructure, Frederiksen said.

WATCH |: The impact of sanctions in Russia seems mixed.

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Russian President Vladimir Putin boasts that Western sanctions have failed to slow the economy, but experts say their impact is beginning to show and that tensions will become more apparent as the year progresses.

Another beer giant, Anheuser-Busch InBev, is trying to sell a stake in a Russian joint venture to Turkish partner Anadolu Efes and has lost revenue as a result.

Sanctions challenge

Companies are lost “in the Bermuda Triangle between EU sanctions, US sanctions and Russian sanctions,” said Michael Harms, executive director of the East German Business Association.

They should find a partner that will not be punished by the West, Harms said.

Big business figures in Russia are often people who are “well connected to the government,” Harms said. “First of all, they have to sell at a big discount or almost give away the assets, and then they buy people we don’t like politically. people who are close to the regime.”

The 10 percent exit tax imposed by Russia is particularly difficult. U.S. companies must get permission from the Treasury Department to pay it or run afoul of U.S. sanctions, said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin.

Hundreds of companies have quietly decided not to leave.

In a rare, candid statement, Steffen Greubel, chief executive of German cash and transport firm Metro AG, said at this year’s shareholder meeting that the company condemns the war “without ifs, ands, and buts.”

Shown is a storefront with a giant logo that says
A store owned by Metro Group is shown in a file photo outside the retail giant’s headquarters in Düsseldorf, Germany. Metro’s chief executive recently said the company condemned the war but had a duty to its shareholders and Russian employees. (Roberto Pfeil / dapd / Associated Press)

However, the decision to stay was driven by the responsibility of the 10,000 local employees and “is also in the interest of preserving the value of this company for shareholders,” he said.

German company Bayer AG, which supplies medicines, agricultural chemicals and seeds, insists that doing some business in Russia is the right move.

“Withholding essential health and agricultural goods from the civilian population, such as cancer or cardiovascular treatments, health products for pregnant women and children, and seeds for growing food, will only multiply the ongoing toll of war on human life,” the company said. statement.

Meanwhile, the shelves of Globus German stores, with about 20 stores operating in Moscow, are as full as they were before the war.

Globus said it had “drastically” cut back on new investment but kept its stores open to keep people supplied with food, saying the food was not subject to sanctions.

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