Companies find it’s not so simple to leave Russia

NEW YORK

When Russia invaded Ukraine, global companies were quick to respond, some announcing they would get out of Russia immediately, others curtailing imports or new investment.

Billions of dollars’ worth of factories, energy holdings and power plants were written off or put up for sale, accompanied by fierce condemnation of the war and expressions of solidarity with Ukraine.

More than a year later, it’s clear: Leaving Russia was not as simple as the first announcements might have made it seem.

Increasingly, Russia has put hurdles in the way of companies that want out, requiring approval by a government commission, while imposing painful discounts and taxes on sale prices.

Though companies’ stories vary, a common theme is having to thread an obstacle course between Western sanctions and outraged public opinion on one side and Russia’s efforts to discourage and penalize departures on the other.

Many companies are simply staying put, sometimes citing responsibility to shareholders or employees or legal obligations to local franchisees or partners.

Others argue that they’re providing essentials like food, farm supplies or medicine. Some say nothing.

For consumers in Moscow, what they can buy hasn’t changed much. While baby products store Mothercare became Mother Bear under new local ownership, most of the items in the Evropeisky Mall shop still bear the Mothercare brand.

The initial exodus from Russia was led by big automakers, oil, tech and professional services companies, with BP, Shell, ExxonMobil and Equinor ending joint ventures or writing off stakes worth billions.

McDonald’s sold its 850 restaurants to a local franchisee, while France’s Renault took a symbolic single ruble for its majority stake in Avtovaz, Russia’s largest carmaker.

Over 1,000 international companies have publicly said they are voluntarily curtailing Russian business beyond what’s required by sanctions.

But the Kremlin keeps adding requirements, recently a “voluntary” 10 percent departure tax directly to the government, plus an understanding that companies would sell at a 50 percent discount.

Companies are lost in “a Bermuda Triangle between EU sanctions, U.S. sanctions and Russia sanctions,” said Michael Harms, executive director of the German Eastern Business Association.

“They must find a partner not sanctioned by the West. In Russia, major business figures are often people who are “well connected with the government,” Harms said. “For one thing, they have to sell at a large discount or almost give assets away, and then they go to people whom politically we don’t like — people who are close to the regime.”