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More than a year after the invasion of Ukraine, it is clear: Leaving Russia is not as easy as the first announcement that can be made for a global company.
Although the companies’ stories differ, a common theme is the need to link Western sanctions and outraged public opinion on the one hand and Russia’s efforts to prevent and punish departures on the other.
Some international brands, such as Coke and Apple, still enter unofficially in third countries even though the companies have decided to exit.
For consumers in Moscow, what they can buy hasn’t changed much. While the Mothercare baby products store became Mother Bear under new local ownership, most items in the Evropeisky Mall store in Moscow still carry the Mothercare brand.
That’s what student Alik Petrosyan saw when he shopped at Maag, who now owns Zara’s flagship clothing store in Moscow.
“The quality doesn’t change, everything stays the same,” he said. “The price has not changed much, taking into account inflation and the economic scenario that happened last year.”
The Kremlin responded with a departure tax
The initial exodus from Russia in the week after February 2022 is led by car manufacturers, oil, technology and professional services companies. BP, Shell, ExxonMobil and Equinor are ending joint ventures or divesting billions worth of stakes. McDonald’s sold 850 restaurants to local franchisees, while France’s Renault took a symbolic one ruble for a majority stake in Avtovaz, Russia’s largest carmaker.
Since the initial wave of departures, some companies are struggling to shed assets and others are trying to do business as usual, sometimes citing responsibilities to shareholders or employees, or legal obligations to franchisees or local partners. Others argue that they provide essential goods like food, agricultural supplies or medicine.
The Kremlin continues to add conditions, recently a “voluntary” departure tax of 10 percent directly to the government, coupled with an understanding that companies will sell at a 50 percent discount.
Russian President Vladimir Putin recently announced that the government would take over the assets of Finnish energy company Fortum and German utility Uniper, banning the sale with an eye to counter Western moves to seize other Russian assets abroad.
More than 1,000 international companies have publicly said they will voluntarily cut back on Russian business beyond the required sanctions, according to a database compiled by Yale University.
Yale’s Jeffrey Sonnenfeld said leaving was the only legitimate business decision, citing research showing the company’s stock price was rising.
“Companies that have pulled out have been rewarded for pulling out,” he said. “It’s not good for shareholders to be associated with Putin’s war machine.”
Leave the ‘complicated process’ behind
Danish brewer Carlsberg announced its intention to divest its Russian business – one of Russia’s largest brewing operations – in March 2022, but faces complications in clarifying the impact of sanctions and finding a suitable buyer.
“It was a complex process, and it took longer than expected,” said Tanja Frederiksen, head of global external communications, and now it is “almost finished”.
He called the Russian business an integral part of Carlsberg. The separation has involved all parts of the company and more than 100 million Danish kroner ($19.6 million Cdn) in investment in new brewing equipment and IT infrastructure, said Frederiksen.
WATCH | The impact of sanctions on Russia appears to be mixed:
Russian President Vladimir Putin has boasted that Western sanctions have failed to slow the economy, but experts say the impact is starting to show and the strain will become more apparent as the year goes on.
Another beer giant, Anheuser-Busch InBev, is trying to sell a stake in its Russian joint venture to Turkey-based partner Anadolu Efes and has written off 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.
He had to find a partner that the West didn’t approve of, Harms said.
In Russia, key business figures are often people “connected to the government,” Harms said. “For one, they have to sell at a huge discount or almost give away their assets, then go to people they don’t like politically – people close to the regime.”
The 10 percent exit tax imposed by Russia is extremely difficult. American companies must seek permission from the Treasury Department to pay or violate 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 and frank explanation, Steffen Greubel, CEO of German cash and company Metro AG, said at this year’s shareholder meeting that the company condemned the war “without ifs, ands or nots.”
However, the decision to stay was driven by responsibility for the 10,000 local employees and “also in the interest of preserving the value of this company for our shareholders,” he said.
Germany’s Bayer AG, which supplies medicines, agricultural chemicals and seeds, says doing some business in Russia is the right move.
“Withholding important health care and agricultural products from the civilian population – such as cancer or cardiovascular care, health products for pregnant women and children as well as seeds for growing food – will only increase the number of war casualties in human life,” the company said in a statement. .
Meanwhile, the shelves are as they were before the war at Globus superstores, a German-based chain with about 20 locations operating in Moscow.
Globus said it had “drastically” cut new investment but kept stores open to ensure food supplies to people, noting that food had not been sanctioned.
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