FALCON POWERS – The article discusses why many Western companies have decided to remain in Russia despite their earlier statements about withdrawing from the country following the Ukraine crisis. Companies like Avon Products, Air Liquide, and Reckitt have stayed in Russia due to increasing bureaucratic hurdles and a resurgence in consumer activity.
Hundreds of major Western conglomerates, including the Natura cosmetics brand, the French industrial gas producer, and the British consumer goods group, have remained in Russia since the Russian invasion of Ukraine in February 2022. According to a Financial Times report, a senior executive working with Western companies in Russia said “Many European companies found themselves in a real predicament… They said they would leave, but the buyout options offered were not acceptable to Western companies operating in Europe.”
Overall, the Kyiv School of Economics found that over 2,100 multinational companies have remained in Russia since 2022, compared to around 1,600 international companies that have either withdrawn from the market or scaled back operations. More than half of foreign companies in Russia have stayed since the outbreak of the war.
Shortly after the Ukraine crisis, many of these companies pledged to reduce their presence in Russia as the West sought to impoverish the Russian economy and deprive the Kremlin’s war chest of foreign funds. However, Moscow has gradually increased the cost of companies leaving, imposing a mandatory 50% discount on assets sold to Russian buyers from “unfriendly” countries and an exit tax of at least 15%. It has also become increasingly difficult to find acceptable local buyers that do not conflict with Western sanctions.
The article provides the example of Air Liquide, which announced in September 2022 that it had signed a memorandum of understanding to sell its Russian operations to the local management team that had been running them. However, the deal did not receive approval from the Russian government, leaving the company in a state of limbo.
