Russian Roulette
Which companies still haven't left Russia
It’s been 538 days since Russian troops entered Ukraine. Amidst the widespread condemnation of Putin and support packages for Ukraine, many global companies with operations in Russia have had to make a choice: remain in Russia, contributing to their economy and therefore to the war effort, or put profits to the side for once and pull out. Today we’ll explore who stayed, and why.
It’s more profitable to leave
After a year and a half of unrelenting war, a team from Kyiv School of Economics investigated all the foreign companies that had operations in Russia prior to the invasion. They classified companies’ activity into four categories: stay (no difference, ‘business as usual’), wait (reduce current operations and hold off on new investments), leave (suspend all Russian operations and/or announce full withdrawal), and exit (sell business/assets, complete withdrawal from Russia). You can read the full paper and find the full list of companies at the link above.
Of the top 100 largest foreign companies in Russia on the first day of the invasion, 19 are still a ‘stay’ with everything running largely as usual. This includes FMCG giants Unilever and Procter & Gamble, and tobacco market leader Philip Morris. Unilever even announced it had ceased all imports and exports of products into and out of Russia, stopping all advertising and only selling ‘essential food and personal hygiene items’ in March 2022, before being discovered to still be selling ice cream in April. Is ice cream an essential food? Let me know in the comments.
The question is, how big of a factor did money play in companies’ decisions to leave Russia? The chart above looks at the 100 largest foreign-owned companies in Russia. We compared 2021 profits to 2022 profits based on the status of their withdrawal, and perhaps surprisingly it was actually most profitable to fully exit the country. Staying did result in higher 2022 profits than 2021, but not to the same extent as fully leaving.
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Business as usual…for some
Expanding the list is a team from Yale, who didn’t just look at the 100 largest companies - but over 1,500. This list, updated regularly, ranks companies on an A-F scale based on how much (or how little) they are doing to pull out of Russia. At the time of writing, there are 219 countries rated F, meaning they have done absolutely nothing to leave Russia. This includes many Asian and Middle Eastern airlines, Chinese banks, and several oil companies.
China alone has 41 companies still operating in a ‘business as usual’ capacity. The rest of the top 7 are Germany with 26, USA with 25, France with 24, India and Japan with 13 each, and Italy with 12 companies. Note that these are mostly privately-owned companies that are headquartered in these countries.
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Created by Miguel
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Interesting piece! In the first chart, how are profits measured? Are profits evaluated for the company as a whole, including all countries where it provides services/sell goods? Or is it only considering Russia's region?