There are fewer well-known Russian companies doing business, even though many have stated plans to reduce ties.
Burger King is open. Eli Lilly supplies drugs. PepsiCo sells milk and baby food but not soda.
Businesses fleeing Russia accelerated in the last week due to the humanitarian crisis and deadly violence in Ukraine. McDonald’s, Starbucks and other major oil companies pulled out of multibillion-dollar investments.
Companies that have a Russian presence say they have employees or franchise owners to consider. They don’t want Russians to be punished by taking away food and medicine. Or they offer financial services or software to Western businesses that are difficult to replace.
It’s a business calculation. The revenue side: What is their Russian income? Mary Lovely, a senior fellow with the Peterson Institute for International Economics in Washington, said that they do provide an essential service. However, calculations change with each passing day. With rising hatred, sanctions against Russia are likely will last a long while.
Companies in less-recognized industries, such as agriculture, have managed to stay under the radar and avoid the social media pressure directed at them.
However, in an era of hyper-awareness among customers and employees about the positions taken by companies on moral and social issues, people still doing business in Russia or with Russia risk their reputations.
Uniqlo, a Japanese clothing retailer, was criticized after its CEO told the Nikkei newspaper on Tuesday that keeping nearly 50 Russian stores open was necessary because “clothing is a necessity for life”. Uniqlo announced that it would shut down the stores by Thursday.
Lovely stated that there is a potential downside for companies to be on wrong side of the law.
Many multinational corporations didn’t flee Russia during the conflict. However, this changed when the invasion caused increasing violence and more than 2,000,000 refugees to flee Ukraine.
According to a list kept by Yale, more than 300 Russian companies have halted operations in Russia. Apple has stopped shipping. Google stopped ad sales. Automakers halted production. Netflix stopped streaming films from Hollywood studios.
Some of these decisions were motivated by the need to comply Western sanctions against Russia. Others were due to supply chain issues or fear of losing their reputations. The S sanctions have already had a significant impact on Russia’s economy and global trade.
Some companies who plan to cut ties with Russia claim it’s not so easy.
Citigroup stated Wednesday that it will be difficult to sell its Russian bank branches because Russia’s economy is disconnected from the global financial system. Citi stated that it will continue to operate the business “on a less limited basis” until then and that it is supporting its U.S. corporate clients in suspending their Russian businesses.
Amazon also stated that its largest cloud-computing customers are located elsewhere. Amazon announced Tuesday that it had stopped accepting new Russian cloud-computing customers and plans to suspend ecommerce shipping to Russia.
Fast-food restaurants often have franchising agreements which make it difficult to exit because they don’t own the locations.
This is why Restaurant Brands International, the owner of Burger King, will keep its 800 restaurants in Russia open. Yum Brands, the parent company of KFC, Pizza Hut and Pizza Hut announced that 70 KFCs owned by Yum Brands will close across Russia. However, it won’t shut down the more than 1,000 franchise-owned KFCs or 50 Pizza Hut restaurants.
This can also apply to hotels: Marriott claims that its Russian hotels are owned and managed by third parties. It is evaluating whether they will be able to stay open.
Susanne Wengle is a Notre Dame political science professor and expert on Russia.
McDonald’s in Russia was a simpler move: It owns the majority of the 850 Russian restaurants it will temporarily shutter.
However, there are still companies that stay in Russia — in whole or part — because they consider their products essential.
One of these is Eli Lilly, a pharmaceutical company. “We continue to distribute medicines to Russia because patients with cancer, diabetes, and other auto-immune disorders all around count on us to support their needs,” Tarsis Lopez stated, noting that the EU and U.S. sanctions don’t apply to medicine.
PepsiCo announced that it would no longer sell soda but will continue to supply Russia with milk, formula, and baby food. Unilever also stated that it will continue to sell Russian-made food products and hygiene products, but it will cease advertising and exporting these products.
Tech companies must balance their roles. Most internet-based service providers like Google, Twitter, and Facebook are reluctant to take any actions that might restrict access for Russian citizens to other information than what they receive from state media. However, Russia blocked Twitter and Facebook, and TikTok suspended the service.
Russia’s role in the export of wheat and other commodities has complicated industrial food producers’ responses.
Bunge, with assets in Russia of $121 millions, stated Thursday that its Russian oilseed plants will continue to operate and serve the domestic markets, but it had suspended “any new export businesses.” John Deere, a farm equipment maker, said that it has stopped machine shipment to Russia. It is also monitoring the Russian plant that produces seeding equipment, and its dealer network, “day-by day.” ADM and Cargill, both other agriculture companies, did not respond to questions.
According to Vincent Smith, an economist at Montana State University, these companies do not want the Russian government seizing their assets if they close down shop.
Others use the livelihoods of their employees to justify decisions to keep or to sever ties.
Starbucks expressed initial concern about its 2,000 Russian employees, but then reversed course on Tuesday. The 130 Russian franchisees of the Kuwaiti company are closing their stores, but they will continue to pay employees.
British American Tobacco said Wednesday that it will continue to make and sell cigarettes in Russia where it employs 2,500 people.
