In response to the invasion of Ukraine, Western companies have come under pressure to withdraw from the Russian market. And most companies, fearing a PR catastrophe, succumbed to the claims and began announcing their departure from Russia. However, it did not go easily.
Last week, IBM announced that it was laying off all of its employees. In recent times, however, the struggles of McDonald’s and Burger King have shown that this is often impossible.
Many Western companies Are provided by license agreements In the country, it imposes duties on them. The McDonald’s Eventually, it came halfway: its products under a different name, but beyond that Are sold The Russians, in turn, do not make money at all.
Everyone will go, but at least they will not stay
According to public statements and reports to bond regulators, global companies have lost more than $ 59 billion from their operations in Russia. The country is being sidelined by Western sanctions that have made it impossible for them to function or are pushing for their withdrawal. Other companies have simply given up on their raw material suppliers, but can expect further financial losses due to the impact of sanctions on the economy.
The Russian government is also making it more difficult for companies to exit. In the wake of the news of the withdrawal and sanctions, President Vladimir Putin passed a law allowing the government to nationalize or confiscate the assets of companies that reduce production or lay off a certain number of employees. Russia has banned the return of dividends to companies and the export of assets such as machinery and processed goods to countries it considers hostile.
Russian lawyers, labor analysts and other government agencies will be contacted as soon as they announce their intention to reduce their companies or leave Russia. These visits, warning letters and saponies threaten to arrest corporate executives critical of the government. The Wall Street Journal.
French carmaker Renault SA has converted a 68 percent stake in Russian carmaker AvtoVAZ into a state-sponsored organization to repurchase its shares for one ruble and six years’ will. Renault has invested billions of euros in Russia and had a market share of nearly thirty percent last year. In addition, it worked for more than forty thousand people in the country. But orders have come from the Kremlin that if they want to leave the country they can not take anything and everything will be nationalized.
The sale to a few U.S. retailers highlights not only Renault’s limited capabilities, but also how difficult it is to reassess a Russian company in the midst of Russia’s isolation from the world and uncertainty over the direction of its economy.
There are big losers
After the invasion, the Danish container shipping company AP Moller-Maersk A / S stopped booking Russia and Russia, decided to stop buying Russian fuel and sell its assets and operations in Russia.
“However, closing a business in a country like Russia is not easy in practice,” CEO Soren Schau told a shareholder meeting in mid-March.
Marsk had more than fifty thousand import bookings on its way to Russia. He tried to deliver fast, but was diverted or stopped due to some obstacles. Marsk had about fifty thousand containers in Russia, which he wanted to get back. A spokesman said the number had dropped to 14,000 by June, but the pace had slowed as some ships arrived at Russian ports to load empty containers.
Budweiser distillery Anheuser-Busch InBev SA tried to prevent its iconic US camp from entering Russia. The company is in a joint venture with Anatoly Ephes, a Turkish brewery based in Ukraine and Russia. In mid-March, AB InBev announced that it had asked regulatory partner Efest to suspend butt sales in Russia.
In late April, AB InBev announced its intention to sell its stake in the business and plan to write off $ 1.1 billion. The parties are still bargaining, but still hard to buy and sell.
Once companies start looking for potential buyers, their options will be less. Western companies should not sell to parties subject to US or EU sanctions. The question is how to calculate the value of a business in a market that is suddenly cut off from the rest of the world.
The French bank Société Générale SA has sold its operations to Russian oligarch Vladimir Botanin, who was not approved by the United States or the European Union, and has reduced its revenues by more than $ 3 billion. The lending company is one of the lucky ones.
There were also cheap survivors
Some companies, such as Apple, which has no factory in Russia, have stopped shipping there. They lose product sales. This can be very painful, especially for luxury fashion brands, which are less likely to make up for the shortcomings. He was almost plundered by the Russian elite LVMH or Prada stores.
For many companies, Russia is not a major selling or investment market, due to the political climate and sanctions imposed after Russia annexed Crimea from Ukraine in 2014.
Analysts at Morgan Stanley estimate that less than one percent of the revenue of thousands of large American and Canadian companies comes from Russia. Seen from here, they didn’t fall much.
(Cover: Vladimir Putin. Photo: Andrei Rudakov / Bloomberg / Getty Images)