Author`s name Dmitry Sudakov

Foreign companies leave Russian market one after another

Many foreign companies, including oil and gas enterprises, are leaving the Russian market due to high risks associated with the sanctions war between Russia and the West. In addition, it will be too difficult for them to withdraw their income from Russia abroad, economist Marcel Salikhov believes. At the same time, oilfield service companies that used to work in Russia back during the days of the USSR, will stay in the country, he added, lenta.ru reports.

It is up to company administrations to decide whether they want to leave the Russian market or not. The sanctions that were imposed on Russia following the military operation in Ukraine do not limit their participation in the Russian economy.

Russia's response to Western sanctions may in one way or another affect the position of foreign companies in the country, especially with regard to strategic sectors of the economy. In addition, Putin banned foreign companies from withdrawing their funds abroad to parent companies. All this combined has tarnished the assets.

Meanwhile, Russian restaurant owners already try to find replacements for imported products amid disruption of supply chains. Many strike out dishes with foreign ingredients from their menus as it is impossible to replace some of them with domestic analogues.

Foreign investors suspend projects in Russia

Many foreign investors announced that they would either suspend their projects in Russia or sell their assets in the country after Putin started the military operation in Ukraine. As of March 2, these included BP, Norway's sovereign wealth fund, ExxonMobil and many others, RBC reports.

In response, the Russian authorities impose temporary restrictions on the exit of foreign investors from Russian assets, Prime Minister Mikhail Mishustin announced on Tuesday, March 1. The authorities expect that those who have invested in Russia will be able to work in the country further, Mishustin said.

"The sanctions pressure will eventually subside, and those who decided not to curtail their projects in our country under the influence of foreign politicians' slogans, will win. As practice shows, exiting the market is easy, but returning to a place that has been taken by competitors is much more difficult,” Mishustin said.

So far, no Western government has demanded its companies should leave Russia. Nevertheless, BP has already announced its intention to sell its stake (19.75%) at Russia's state-run oil giant Rosneft. Italy's largest oil and gas company Eni will exit the Blue Stream gas pipeline project that connects Russia with Turkey. The company owns 50% of the project.

Major foreign companies make hundreds of billions of rubles of profit in Russia. For example, in 2022 alone:

  • Japan Tobacco International (JTI) — 311.8 billion rubles,
  • Leroy Merlin — 347.2 billion rubles,
  • Philip Morris International — 359.5 billion rubles,
  • Auchan — 223 billion rubles,
  • Groupe Renault — 310 billion rubles,
  • IKEA — 123 billion rubles,
  • PepsiCo — 252.4 billion rubles,
  • Samsung — 246 billion rubles,
  • Apple — 266 billion rubles,
  • Huawei — 128 billion rubles.

A lot of foreign companies have already announced their decisions to suspend activities in Russia.

On March 2, Apple suspended the sales of its products in Russia due to the Ukraine crisis. The work of Apple Pay system and other services of the corporation will be limited in Russia due to sanctions against Russian banks.

Swiss company Mediterranean Shipping Company (MSC) has suspended the transportation of containers in Russia, Interfax reports. Exceptions were made for the transportation of medical equipment, humanitarian goods and food.

Maersk, a Danish company, has also decided to suspend container traffic to Russia as a retaliatory gesture against the military operation in Ukraine. The decision came into force on March 1.

DHL suspended its activities in Russia, Belarus and Ukraine.

Universal, Disney, Warner Bros, Paramount, Sony and other studios have suspended the distribution of their motion pictures in Russian cinemas.

US automaker Ford has decided to leave the Russian market. Many other car makers have suspended shipments of their vehicles to the Russian market as well.

Audi, GM, Citroen, Mercedes, Škoda, Jaguar Land Rover, Porsche, Peugeot, Citroёn, BMW and other automakers have suspended their deliveries to Russia. Conveyors were temporarily closed at Volkswagen, Renault and AvtoVAZ automotive plants.

On March 1, US-based aircraft manufacturer Boeing suspended the supply of spare parts to Russia. Boeing also stopped providing maintenance and technical support services for Russian airlines. In addition, Boeing closed its training center in Moscow and an office in Kyiv.

EU's Airbus Corporation announced similar decisions.

Nike, one of the largest companies producing sportswear and footwear, announced the suspension of its online store in Russia. Nike's offline stores continue to operate as usual.

It appears that this will continue growing every day.

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