Thirty years ago, when communism collapsed in the Soviet Union, Western companies were the first to enter the Russian market.
The arrival of brands such as Coca-Cola and McDonald’s marked the beginning of a new era, which was soon followed by the arrival of retailers, mining companies, lawyers and consultants. The Russians longed for Levy and other luxury goods.
Now some companies, including Apple, Land Rover, Jaguar, H&M and Burberry, have announced that they will suspend their operations in Russia following the military occupation of Russian President Vladimir Putin in Ukraine.
Which companies, which sectors, are leaving Russia as soon as possible? Why were the others silent?
Oil and gas
When the conflict erupted in Ukraine, the oil company BP was under immediate pressure. The company holds a large stake in Russian energy company Rosneft, but announced that it would drop the move within a few days.
This was followed by Shell, ExxonMobil and Equinor shareholders pledging to cut off Russian investment following pressure from governments and the public.
Those stocks are very valuable in Russia’s energy sector. Rosneft’s stake in BP is one-fifth of the company’s recent revenue. Shell could sacrifice up to $ 3 billion to get out of its efforts with Russia’s Gazprom.
But Rose Mold, AG Bell’s investment director, says companies want to see it done “right.”
Meanwhile, Total Energy, another major Russian company, does not fund new projects in the country but, unlike its counterparts, does not plan to sell off existing investments.
It is unknown at this time what he will do after leaving the post.
Department of Entertainment
Movie fans in Russia who want to watch Warner Bros.’s new Batman movie will not be able to do so after the company stopped releasing new films in the country.
Disney and Sony teamed up with American Warner Bros. after the first scenes of the films, including “Turning Red” and “Morpheus”, were withdrawn.
The streaming site Netflix has suspended all “future plans” in Russia, as well as assesses the “impact of current events”.
All companies said their decisions were based on the “humanitarian crisis” in Ukraine and not the result of sanctions.
But the result will send the same message. Susanna Schreider, chief investment and market analyst at Hargreaves Lansdowne, says the exclusion will only increase Russia’s sense of loneliness.
Department of Technology
Apple has stopped selling all of its products in Russia and restricts other services such as Apple Pay and Apple Maps. Its stores are also closed.
For a company like Apple that sells imported goods, this is a relatively straightforward decision, says Chris Weaver, CEO of Micro Advisory Ltd., which has been operating in Moscow for the past 24 years.
“Companies do not want to interact with the Russian organization and what is happening in Ukraine,” Weaver said. Their business in Russia may be profitable, but “more than the rest of the world” when it comes to risking such a reputation.
Also, some technology companies are drowning in misinformation and controlling Kremlin-linked media on their sites.
For example, Facebook was banned in Russia after state-owned news organizations refused to stop verifying the truth and categorizing content.
Swedish fashion company H&M has become the latest retailer to exit the Russian market, and many companies are likely to follow suit, said Maureen Hinton of retail business consulting firm Global Data. British fashion company Boho has stopped selling to Russia and closed its websites in the country.
But while H&M noted “tragic improvements” in Ukraine, other brands, including Nike, said they could not guarantee delivery of goods to customers in Russia at this time.
Fashion House Burberry, which owns a flagship store in Moscow’s Red Square, said it had suspended all exports “because orders in Russia have become harder to execute”.
Russia was the fifth largest retail market in Europe by 2021, valued at 337.2 billion. And some brands may not want to disconnect if they have a chance to come back later.
That’s why many companies claim to be “reconsidering” or “stopping” rather than withdrawing sales altogether, says Chris Weaver.
The business environment makes the decision to suspend easier, with restrictions restricting payment forms, restrictions on foreign exchange outflows, and greater uncertainty about future prices and consumer preferences.
Jaguar Land Rover, General Motors, Aston Martin and Rolls-Royce were among the automakers who stopped supplying vehicles to Russia due to the conflict in Ukraine. JCB Construction Equipment Factory has suspended all operations.
Russia’s largest export cars to Russia, but despite this only 1% of British cars went to Russia last year.
So any decision to stop exports will not be costly, and will be easier by raising concerns about whether the money will come in, says investment analyst Rose Mold.
Getting cars to Russia can be difficult anyway, as the world’s two largest shipping companies, MSC and Maersk, have suspended shipping to and from Russia, excluding food, medicine and humanitarian supplies.
Some carmakers, such as Volkswagen and BMW, had to suspend production at some European plants due to a shortage of spare parts from Ukraine.
Among the first to establish a presence in Russia after the fall of communism were large consulting and law firms, but they often operate out of light.
Most of these companies have so far been quiet about their plans after the Russian invasion of Ukraine, but Jonathan Holt, head of KPMG in the UK, said he would review his clients in line with sanctions. He said this would put an end to some ties between Britain and the world.
EY said it complied with the ban, but did not confirm whether it intends to sever ties with any of its customers.
Some law and consulting firms also claim to be reviewing their customer base and Russian contacts.
For example, a senior executive at consulting firm McKinsey wrote in a social media post that the company “no longer serves any government agency in Russia.”
But according to reports in the Wall Street Journal, McKinsey did not comment on whether the ban would apply to state-owned companies such as Rosneft. According to McKinsey’s website, the company offers its services to 21 of the 30 largest Russian companies.
Who relies on the Russian market?
While the flow of advertising of companies away from Russia continues, more and more companies are being invited to join their predecessors in moving away from the Russian market, especially some of the big consumer brands.
But with the salient advantages, you must know some of the disadvantages as well.
In response to Western sanctions, the Russian government banned the sale of Russian assets. So in recent years companies that have been encouraged to establish a presence in Russia have become “locked up” by local companies, employees and supply chains to produce food or detergent.
Weaver believes it is possible for big consumer brands to express their concerns about the military conflict, but is trying to “get out of the crisis.”
“They will open the door for improvement to allow them to stay,” Weaver said.
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