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Foreign companies still active in Russia

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Since the invasion of Ukraine began more than two weeks ago, Russia has been suffering severe economic consequences due to the heavy sanctions imposed by the European Union and the United States, and the general suspension of activities by more than 300 foreign companies active in Russia. , including some of the largest in the world. However, a minority of international companies have not made the same decision and are continuing to maintain their businesses in Russia, while putting their reputation at risk.

The reasons why dozens of companies have not suspended their activities are mainly related to economic interests and dependencies on the Russian market. Among these is, for example, the Italian multinational Pirelli, a tire manufacturer, which has 10 per cent of its production plants in Russia. Or Mondelez (producer of Oreos and many other food products), Ferragamo and Bosch, all companies that derive a substantial part of their revenues from the Russian market.

Among these there is also the US banking group Citigroup, which for about a year has been trying to get rid of its investments in Russia and close branches in the country, but has not succeeded. due to legal complications. The group’s net exposure in Russia is $ 9.8 billion.

Other large Western companies have instead communicated the suspension of all their activities in Russia. The list has gradually expanded over the days and now includes companies such as Coca-Cola, McDonald’s, Microsoft, BP, Shell, Airbus, Boeing, Stellantis, Ford, Mercedes-Benz, Toyota, Volvo, Volkswagen, Disney, Adidas , Airbnb, Ikea, Sony, Unilever and Nestlé, just to name a few.

For other foreign companies that have decided to stay in Russia there are ethical reasons, for example pharmaceutical ones. The head of the finance division of the multinational Johnson & Johnson, Joseph Wolk, said on Tuesday: “If our products stop reaching patients in Russia who need them, they will die or suffer serious consequences.” Other multinationals have announced that they will not make new investments in the Russian market – which, however, is not very profitable for Western pharmaceutical multinationals – but that they will continue to distribute essential drugs, such as anticancer drugs.

Yale University has prepared a document, widely circulated and discussed in recent days, with the detailed list of mostly Western companies still active in Russia, constantly updated by Professor Jeffrey Sonnenfeld and his team of researchers. When the list was first published there were only a few dozen companies, now there are 350.

According to Sonnenfeld, who wrote an article on this subject Fortune, such a freeze in economic activities could play a significant role in the crisis linked to Ukraine. The article recalls a similar dynamic that occurred in South Africa in the mid-1980s, when several US companies chose to close their operations in the country, following movements and initiatives to abolish apartheid, racial segregation in the country. In that case, the US-imposed sanctions action coupled with the blocking of economic activities was effective in the long run, Sonnenfeld writes.

According to James O’Rourke, a management professor, the economic cost of companies leaving Russia could in many cases be lower than the cost of staying there and damaging their reputation in the West. “If you want to continue doing business in the rest of the free world, you have to be careful what people think of you,” O’Rourke said. to the Washington Post. “This could be one of the moments in history where divesting is the best option. […] If you can’t move your assets in and out of Russia, using convertible currency, what’s the point of staying there? “

For companies that are having legal problems closing their businesses there is also the risk that their assets will be nationalized by Russia. This week the Russian Attorney General he said that any provision for the closure of economic activities will receive a “legal assessment”, and that there will be “strict control” on compliance with labor laws, “including the terms of employee contracts and the payment of wages”, to “ensure the interests of businesses and workers, the prosecutor said.

In addition, Russian President Vladimir Putin on Thursday said that foreign companies that are leaving Russia should be given to “those who want to make them work.”