West News Wire: Even while hundreds of corporations have announced plans to cut connections with Russia, a good number of well-known companies continue to do business there.
Burger King is open, Eli Lilly is selling medications, and PepsiCo is offering milk and baby food, but no soda.
As the war in Ukraine escalated, and as Western governments ratcheted up economic penalties to punish Russia for its two-week-old invasion, the pace of firms leaving Russia has accelerated.
Companies that remain in Russia claim they have franchise owners or employees to consider, that they don’t want to punish Russians by withholding food or medicine, or that they provide software or financial services for Western corporations that are difficult to replace.
“It’s a business calculation,” says the narrator. On the topic of staying, how much money do they make in Russia? “Do they offer a necessary service?” Mary Lovely, a senior scholar at the Washington-based Peterson Institute for International Economics, agreed. “However, computations alter with each passing day. Sanctions on Russia are likely to last for a long time, as is growing public disapproval.”
But in this era of hyper-awareness that some customers and even employees have about the positions companies take on social and moral issues, those still doing business with or in Russia are putting their reputations on the line.
Many large multinationals didn’t flee Russia at the start of the war. But that changed as the invasion led to increasing violence and more than 2 million refugees fleeing Ukraine.
Some of these decisions were driven by the need to comply with the sanctions Western governments leveled at Russia; others came because of supply chain issues or the fear of a hit to their reputations. Sanctions have already taken a toll on Russia’s economy and global trade.
Citigroup said Wednesday that selling its 11 Russian bank branches will be difficult because the country’s economy has been cut off from the global financial system. Until then, Citi said it is “operating the business on a more limited basis” and is helping its U.S. and other corporate clients suspend their businesses in Russia.
Likewise, Amazon says its biggest cloud-computing customers in Russia are headquartered elsewhere. The company said Tuesday it has stopped accepting new cloud-computing customers in Russia and that it plans to suspend e-commerce shipments to Russia.
Fast-food companies often have franchising agreements that complicate an exit, because they don’t own those locations.
That helps explain why Restaurant Brands International, owner of Burger King, is keeping its 800 restaurants open in Russia. And why Yum Brands, parent company of KFC and Pizza Hut, announced the closure of 70 company-owned KFCs across Russia, but not the nearly 1,000 franchisee-owned KFCs, or its 50 Pizza Hut locations.
This sometimes applies to hotels as well: Marriott says its Russian hotels are owned by third parties, and it’s evaluating their ability to remain open.
“I think a lot of these companies are expecting a backlash if they’re staying,” said Susanne Wengle, a political science professor and Russia expert at Notre Dame.
But there are companies that remain in Russia whether in whole or in part and say that it’s because they view their products as essential.
Pharmaceutical company Eli Lilly is one of them. “We continue to distribute medicines in Russia as patients with cancer, diabetes and auto-immune diseases everywhere count on us to support them,” said spokesperson Tarsis Lopez, noting that EU and U.S. sanctions do not apply to medicine.
PepsiCo said it will stop selling soda, but that it will continue to supply milk, baby formula and baby food in Russia. And Unilever said it will keep selling “everyday essential” Russian-made food and hygiene products to Russians, but that it will stop exporting and advertising these products.
Tech companies have their own balancing act. Providers of internet-based services like Google, Twitter and Facebook have been mostly reluctant to take actions that could deprive Russian citizens access to information other than what they get from state media. (Russia blocked Facebook and Twitter, however, and then TikTok largely suspended its service in the country.)
The response from industrial food producers has been complicated by Russia’s role as a major exporter of wheat and other commodities.
Bunge, which has assets of $121 million in Russia, said Thursday that its Russian oilseed plant will operate and serve the domestic market, but that it has suspended “any new export business.” Farm equipment maker John Deere said it has stopped machine shipments to Russia; it is monitoring a Russian plant that makes seeding equipment and its dealer network in the country “day-by-day.” Cargill and ADM, other agriculture companies, have not responded to questions.
These companies don’t want the Russian government to seize their assets should they close up shop, said Vincent Smith, an economics professor at Montana State University.
Other companies point to their employees’ livelihoods in rationalizing decisions to stay, or not completely sever ties.
Starbucks initially expressed concern for its 2,000 Russian employees before reversing course Tuesday. The Kuwaiti company that franchises its 130 Russian stores is closing them, but continuing to pay employees.
British American Tobacco on Wednesday said it would keep making and selling cigarettes in Russia, where it has 2,500 employees, citing a “duty of care” for employees.
