PARIS: Should they go at this time or stay? Many Western businesses in Russia are still considering the advantages and disadvantages 18 months after the start of the war in Ukraine.
There are still about 100 G7 corporations operating in Russia, according to a Yale University survey, albeit the number may be declining.
According to Julien Vercueil, an economist with expertise in Russia, “we continue the trend of reducing the activities of Western companies on Russian territory.”
Faced with an “increasingly difficult environment,” US pizza chain Domino’s decided to throw in the towel on August 21, declaring bankruptcy for its Russian operations, which it had been trying to sell since December, and closing 142 locations across the country.
“The war creates unfavorable conditions for foreign companies in Russia, whatever they decide to do,” Vercueil said. If they leave Russia, especially if they do so in a hurry, these companies “may lose a lot, but it will be once and for all,” he said.
According to an analysis by The Financial Times, which examined the annual accounts of 600 European multinationals, they lost a total of at least 100 billion euros ($108 billion) “after selling, closing or curtailing their Russian activities.”
French carmaker Renault, for example, suffered a loss of 2.2 billion euros when it pulled out of Russia, one of its main markets, in May 2022.
However, oil companies lost the most. BP, one of the first to fully withdraw from Russia shortly after fighting in Ukraine began in February 2022, took an estimated hit of more than €22bn.
On the other hand, continuing to do business in Russia exposes Western firms to “significant reputational costs,” Vercueil said.
Ukrainians, and in particular their high-ranking President Volodymyr Zelenskyi, have been vocal in accusing such companies of “funding Russia’s war through the profits they make on Russian territory,” he said.
Food, agricultural and distribution giants, many of which have remained in Russia, are often targeted.
The French supermarket chain Auchan is an example of this.
Ukraine said on Wednesday that fragments of a Russian missile had hit the Auchan shopping center in Kyiv and repeatedly called on the company to end its Russian operations.
“Cynicism, masochism or stupidity? Get out of Russia: this money is too bloody,” the Ministry of Defense said.
Many Western companies that have remained in Russia say they are securing the livelihoods of their employees and preventing their businesses from falling into the hands of Russian officials.
These arguments did not convince everyone.
“These companies explain that they are staying for humanitarian reasons – that’s a cynical lie,” said Jeffrey Sonnenfeld, a professor specializing in corporate social responsibility at Yale University, who compiled a list of Western companies that are leaving or staying in Russia.
In his view, these large groups not only help keep the Russian economy going, but also play into President Vladimir Putin’s hands by reassuring consumers with their presence.
The rest were in some cases the target of boycotts.
Scandinavian organizations are boycotting US group Mondelez, maker of snacks such as Oreo and Toblerone, over its continued presence in Russia.
The airline SAS, the Norwegian Football Federation and the Swedish military are among those rejecting products made by the company formerly known as Kraft Foods and its subsidiaries Freia in Norway and Marabou in Sweden.
Companies that continue to operate in Russia also face the threat of confiscation of their businesses and their profits.
“It is dangerous to remain when the legal environment is now openly characterized by arbitrariness and state predation at the expense of foreign interests,” Vercueil said.
Under one decree, Russia can “temporarily take control of companies” from countries considered “hostile”, Vladimir Tchikine, a lawyer specializing in corporate law in Russia, told AFP.
In recent months, Danish brewer Carlsberg and French food giant Danone have felt the force of this retaliatory policy.
While the two industrial giants were selling their Russian operations, the Russian state surprised them by unilaterally taking control of their assets in the country.
