Russia’s war spurs corporate exodus and exposes trade risks
LONDON — Auto shipments have stopped, beer has stopped flowing, freighters have abandoned stopovers and oil companies have cut their pipelines.
Russia’s invasion of Ukraine has upended business plans and forced a growing number of the world’s best-known brands – from Apple to Ford and BP – to withdraw from a country that has become a pariah global as companies seek to maintain their reputations and live up to corporate responsibility standards.
Investors were drawn to Russia in search of lucrative profits that they believed were worth the geopolitical risks. That calculus changed after Russian President Vladimir Putin launched war in Europe, triggering a wave of global sanctions and export restrictions that threw its economy into turmoil and disrupted the operations of multinational corporations there.
“Basically, Russia is becoming a trade pariah,” said economist Mary Lovely, senior fellow at the Peterson Institute for International Economics in Washington. “Hardly any company, any multinational wants to be caught on the wrong side of US and Western sanctions.”
They also express concern about the fate of Ukrainians, showing how they want to be seen on the right side of history.
To complicate the leak, an order from Moscow is temporarily preventing foreign investors from selling Russian assets. Prime Minister Mikhail Mishustin said on Tuesday it would help investors make “a thoughtful decision” rather than succumb to political pressure from sanctions. It is unclear how this may affect the companies’ efforts to leave Russia.
Oil and gas companies, which are already feeling the heat from climate activists to invest in renewable energy, were among the companies to announce the fastest and most dramatic exits.
Energy company BP said on Sunday it would exit its $14 billion stake in state oil and gas company Rosneft. Shell announced the next day that it was quitting its joint venture with state-owned Gazprom and its involvement in the now-suspended Nord Stream 2 gas pipeline, built to transport natural gas to Western Europe.
ExxonMobil said it would pull out of a key oil and gas project and stop all new investment in Russia. All of their chief executives said they were shocked and saddened by the increasingly bloody conflict. Smaller energy companies have followed suit.
Firms in other sectors have indicated that they are staying out of the Russian market, either out of concern for Ukraine or to comply with Western sanctions.
Swedish car brand Volvo Cars said it was not delivering cars to Russia at this time in light of “potential risks associated with material trade with Russia, including EU and US sanctions. United”.
U.S. automaker Ford, which has ended operations in Russia and has only a minority stake in a commercial van joint venture, told partners it was suspending operations.
Similarly, Harley-Davidson halted motorcycle shipments to Russia and said its thoughts “continue for the safety of the Ukrainian people.” Putin rode a three-wheeled Harley during a visit to Ukraine in 2010.
Others with more entrenched Russian operations may find it harder to weather the crisis.
Renault, one of the biggest players in the Russian car market, only said it was temporarily suspending production at its Moscow plant until Saturday “due to logistical issues”, without being more specific.
Czech brewer Budvar, which counts Russia as one of its top five markets, halted beer production and deliveries to the country, saying business was not the top priority and it was looking for ways to help, in particular by finding accommodation for Ukrainian refugees.
Copenhagen-based Danish brewing group Carlsberg suspended production at two breweries in Ukraine, saying it was “following the situation with great concern”, but did not comment on its extensive operations in Russia, including Baltika Breweries. , based in St. Petersburg, which exports beer worldwide.
The world’s largest shipping company, AP Moller-Maersk, said it would stop calling at Russian ports, saying it was “deeply concerned” about the escalating crisis.
Aircraft makers Boeing and Airbus have stopped supplying parts and support services to Russian carriers. Boeing said it suspended major operations in Moscow and temporarily closed its Kyiv office.
Hollywood studios are delaying the release of new films in Russia, which is not a top movie market but generally ranks in the top twelve countries for box office receipts. Warner Bros., Walt Disney Co., Sony Pictures cited the “humanitarian crisis”.
Tech companies have also headed for the door.
Apple said on Tuesday it would stop selling its iPhone and other popular devices in Russia.
Computer maker Dell Technologies said it had “suspended” sales in Ukraine and Russia, but a spokesperson did not say why.
Google and TikTok have blocked Russian state media channels from their platforms after an appeal from the European Union. Apple has also blocked downloads of the RT News and Sputnik News apps from its mobile app store outside of Russia.
Leaders are realizing it makes more sense to pull out of Russia, business experts say.
“It is really difficult to do business in Russia in the best conditions. Now it just got crazy. So going out is a smart business proposition,” said James O’Rourke, professor of management at the University of Notre Dame’s Mendoza College of Business, who specializes in reputation management and corporate communications.
Businesses will have to account for all losses as the cost of doing business.
“It’s like going into business with the Manson family,” O’Rourke said, referring to supporters of cult leader Charles Manson. “Honestly, you don’t want your name associated with these people, and it probably won’t cost you that much to divest.
It is not just sanctions but public sentiment that corporations must respond to as the human costs of war mount.
Companies’ commitments to environmental, social and corporate governance, known as ESG, are being put to the test. ESG has become a buzzy acronym that is increasingly seen as an important way for companies to promote responsible business.
“But there can also be an element of greenwashing,” where companies say things that give the impression that they hold certain values or are on the right side of ESG issues when their practices and behavior suggest otherwise, a said Vanessa Burbano, associate professor at Columbia Business School. .
“Stakeholders such as employees and consumers will want to see if companies’ actions and behaviors are consistent with the communicated support companies are expressing to Ukrainians,” she said.
Some companies went beyond simple statements about stopping deliveries or operations.
Lego, Ford, Volkswagen Group and its Czech brand Skoda said they would make millions of dollars in charitable donations to support Ukrainian refugees.
Associated Press writers Matt O’Brien in Providence, Rhode Island; Danica Kirka in London; Ken Sweet in New York; Michael Liedtke in San Ramon, California; and Jan M. Olsen in Copenhagen, Denmark, contributed to this report.
Follow AP’s coverage of Russia-Ukraine tensions at https://apnews.com/hub/russia-ukraine. Follow Kelvin Chan on Twitter at https://www.twitter.com/chanman.