Leave Russia? A year later many companies can’t or won’t

PARIS – When Russia invaded Ukraine, a phalanx of Western companies pledged to get out fast from what had once been an important market. McDonald’s dismantled its golden arches after 32 years. Oil giant BP moved to divest its mammoth Russian investments. French automaker Renault sold its factories for the symbolic sum of one rouble.

But a year into the war, hundreds of Western businesses are still in Russia, including blue chip and midsize companies from Europe and the United States. They are doing business despite Western sanctions and boisterous boycott campaigns pressed by Ukrainian officials, consumers and human rights groups.

Some companies, facing accusations that they are helping finance Russia’s aggression, say they are staying because their customers need them. Among them is Auchan, one of France’s largest supermarket chains, which has kept its 230 stores in Russia open and says it intends to stay. The retailer has drawn the ire of Ukrainian President Volodymyr Zelenskyy and recently faced fresh calls for a boycott after a report that Auchan’s Russian subsidiary supplied donated food to the country’s military.

Auchan has denied those allegations but is unapologetic about remaining in Russia and Ukraine, where it also has stores, to “meet the essential food needs of the civilian populations.”

Other companies have scaled back their Russia operations, or their exits, announced last spring, have stalled.

Pharmaceutical giant Pfizer has stopped investing in Russia but continues to sell a limited range of products, with the profits sent to Ukraine humanitarian groups. Carlsberg is trying to find a buyer for its Russian breweries that would offer buyback clauses to allow the company to return when the war ended.

For many companies, extraction from Russia has been trickier than expected. Moscow has tied their hands, they say, by brandishing the threat of nationalisation and other obstacles. Western corporate chiefs frequently say they have a responsibility to shareholders to find buyers that provide some value for billions in assets, rather than surrender them to Moscow. Such concerns prompted tobacco giant Philip Morris to say last month that it might never sell its Russian business, despite efforts to do so.

Others do not want to risk surrendering market share to companies from China, Turkey, India or Latin America, whose governments are not part of the sanctions regime, and are eyeing properties and equity stakes left by departing Western firms.

Data compiled by Yale showed that of nearly 1,600 companies in Russia before the war, more than one-quarter had continued to operate fully there, with some only postponing planned investments. In a survey of twice as many firms, by the Kyiv School of Economics, that proportion was closer to 50 per cent.

But another study suggests how few have fully cut ties, finding that below 9 per cent of about 1,400 companies from Europe, the United States, Japan, Britain and Canada had divested a Russian subsidiary since the war. Those that did accounted for a small share of the Western business footprint, which the report said called into question the willingness of Western firms to leave.

Despite their saber-rattling, Russian authorities are concerned about limiting the economic hit from sanctions and preserving hundreds of thousands of jobs, and would prefer not to see Western investors exit, said Dimitri Lavrov, a senior partner at Nexlaw, a Geneva law firm that counsels multinationals in Russia.

A draft bill circulating in the Russian Duma would allow foreign investors “to preserve both their assets and the actual presence of their business in the country, and the possibility to return to Russia in case of forced withdrawal,” Mr Lavrov added.

Auchan offers a window onto the complications that Western companies say they face. Since the war, the privately held company has insisted that keeping its stores open in Russia was necessary to provide food to its civilian customers and maintain employment for 29,000 workers.