May 18, 2022

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Foreign companies are still active in Russia

Since the start of the invasion of Ukraine more than two weeks ago, Russia has suffered severe economic consequences due to the severe sanctions imposed by the European Union and the United States, and the public suspension of the activities of 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 continue to maintain their business in Russia, while jeopardizing their reputation.

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

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

Instead, other large Western companies have reported suspending all of 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, Nestlé , For example, but not limited.

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For other foreign companies that decided to stay in Russia there Ethical reasonsFor example, medicines. “If our products stop getting to patients in Russia who need them, they will die or suffer dire consequences,” Joseph Wolk, chief financial officer of the multinational Johnson & Johnson, said Tuesday. Other multinationals have announced that they will not make new investments in the Russian market – which, however, is not very profitable for Western multinational pharmaceutical companies – but will continue to distribute essential medicines, such as anti-cancer drugs.

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

According to Sonnenfeld, who wrote an article on the subject luckSuch a freeze in economic activities could play an important role in the Ukraine-related crisis. The article recalls a similar dynamic that occurred in South Africa in the mid-1980s, when many US companies chose to close their operations in the country, following movements and initiatives to desegregate and desegregate the country. Sonnenfeld wrote that in this case, the sanctions measures imposed by the United States along with the prevention of economic activities were effective in the long run.

According to James O’Rourke, a professor of management, the economic cost of companies leaving Russia may in many cases be less 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 me Washington Post. “This may be one of the moments in history where abstraction 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? “

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For companies facing legal problems in closing their businesses, there is also the risk of their assets being nationalized by Russia. This week, the Russian Prosecutor General He said That any provision for the closure of economic activities would receive a “legal assessment,” and that there would be “strict control” of compliance with labor laws, “including the terms of employee contracts and the payment of wages,” in order to “ensure the interests of businesses and workers,” the attorney general said.

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