Moscow Warns Western Firms: Expect Consequences for Exiting Russia Amid Ukraine Conflict
“We are not waiting for anyone with open arms. There will be a price to pay for past decisions,” said Anton Alikhanov, Russia’s industry and trade minister. Such a statement, curt and unwavering, was delivered to reporters on Thursday, as relayed by the state news agency TASS.
Amid the ongoing conflict in Ukraine, now stretching into its third year, there exists a remarkable trend—nearly 475 foreign companies have quoted adieu to the Russian marketplace, according to data from the Leave Russia database provided by the Kyiv School of Economics. Notable names that have exited include McDonald’s, Starbucks, Ikea, the British powerhouse Shell, and Japanese tire titan Bridgestone.
It is not just these companies’ exodus that garners attention but also Russia’s pivot in response. Alikhanov pointedly noted that the nation is prioritizing indigenous development over holding out for the potential return of foreign brands. This sentiment reverberates across geopolitical lines, suggesting a shift in focus towards nurturing local industries.
In an intriguing twist, as President Donald Trump opened the door to the possibility of reconciliation between the US and Russia, murmurs began circulating about the plausibility of some companies returning. Andrew Staples, of business strategy and geopolitical risk consultancy GeoPol Asia, posited, “It is reasonable to assume that some companies will seek to return to Russia following a comprehensive settlement to end the war,” during an interview with Business Insider.
Meanwhile, Denis Manturov, Russia’s first deputy prime minister, underscored this pivot towards domestic firms and those from the Eurasian Economic Union, a collective of five post-Soviet states, infused with a persistent focus on regional partnerships. “We will clear for our market the ones of interest for ourselves,” he stated emphatically.
Foreign firms are probably not rushing back to Russia either
Despite the changing winds, international companies are unlikely to make a mad dash back to Russian soil. Edward Verona, a seasoned business executive with firsthand experience from his tenure in Moscow during the 1990s and 2000s, suggested: “Taking another chance on Russia might seem appealing to some. After all, memories can be short in the business world,” in a piece he penned for the Atlantic Council’s Eurasia Center.
Safety concerns surrounding non-Russian personnel and the uncertainties tied to legal frameworks in Russia linger, and unilateral goodwill deals might not be sufficient bait for these Western entities. European firms, factoring in geographical and political distances, might be more hesitant than those in the US. Staples remarked, “US firms may feel less restrained to return than European firms.”
Even with a hypothetical revocation of current sanctions, the proverbial fog of reluctance hangs heavy. Countries proximate to the conflict—Poland, the Baltic states, Scandinavia, and more—might remain aloof, wary of past transgressions resurfacing.
Andrew Staples indicated that companies dealing in consumer goods or those in non-strategic sectors might edge closer sooner than their counterparts in energy, technology, finance, or the defense industries. For businesses that turned their back on Russia for moral imperatives, any imminent return poles apart from reality.
Russia’s wartime economy
Foremost among considerations for returning companies is assessing the Russian market’s worthiness. Does the allure justify the potential pitfalls?
Staples emphasized, “Perhaps most importantly, from a business perspective, the outlook for the economy is not great,” considering challenges like high inflation and rigid monetary policies.
Despite facing three years of Western sanctions, Russia’s economy miraculously sustains itself, recalibrating its central efforts to defense production and augmenting military expenditures—projected to command 8% of its gross domestic product by 2025.
Troubles persist as the ruble slumped initially to a stark two-year low amidst Europe’s gradual decoupling from Russian energy. But the telltale uncertainty was nudged aside when a fresh wave of optimism buoyed the ruble, peaking it at 88.67 against the dollar recently.
In the interlude, the local champion Yandex showcases an anomaly—posting record revenues and hinting at national potential beyond typical rubles and kopeks. Yet beneath this sheen, there remain sectors besieged by adversity, agriculture, automotive, and commodity industries stumbling through economic labyrinths.
A notable maneuver was Yandex’s divorcement from its Dutch-domiciled ownership, aligning with localized custodians—an emblem of shifting tides. However, peril looms over Russia’s larger-than-life energy role, now challenged globally by new competitors.
Staples’ parting question resonates deeply: “Given this economic assessment and continued political and reputational risk of being in Russia, is it an attractive place for foreign firms? I wouldn’t anticipate a ‘rush to get back to Russia.'”
Business risks in Putin’s Russia
One cannot overlook the intricate layers of political unpredictability intrinsic to Russia under Putin’s steadfast presidency—a ruler now in pursuit of a possibly perennial incumbency.
Edward Verona eloquently juxtaposed contemporary Russia with its Yeltsin-period counterpart, highlighting an era when strategic partnerships with the West were far more conceivable.
“It is not even the Russia of the early 2000s,” Verona elaborated, reflecting on a time before Putin fully consolidated sway, evolving from rudimentary democracy into an otherwise steadfast autocracy. “After twenty-five years of Putin’s rule, the Kremlin now dominates all aspects of Russian life, including the country’s business climate.”
In this convoluted state, international enterprises ponder—does the intrigue amidst risks coalesce into a venture worth pursuing? With variables myriad and stakes substantial, the inception of each opportunity seems entwined with forethought.
Edited By Ali Musa
Axadle Times international–Monitoring
