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New study by the University of St. Gallen and the IMD: Less than 9 percent of Western companies have left Russia


After the start of the Ukraine war, western companies announced their withdrawal from Russia. But more than 91 percent ultimately stayed – and most of them have their headquarters in Germany.

Enlarge image

Sold: Only a few western corporations have sold their Russian subsidiaries.

One of them is the coffee chain Starbucks, which has been called "Star Coffee" since the change of operator

Photo: Dmitry Serebryakov / dpa

Renault, McDonald's, Shell, Dr.

Oetker, Nike, Starbucks – they and many more announced their withdrawal from Russia last year in response to the Russian invasion of Ukraine.

"There's no going back," said Tengelmann owner

Christian Straub

(59) to manager magazin shortly after the start of the war - and shortly afterwards actually gave away his 27 branches to a Russian investor.

This gave the impression that the majority of Western companies severed their business relationships with war criminal Russia over the course of the year.

But apart from a few often prominent exceptions, it was not the case, a study now shows.

In fact, less than a tenth of Western companies actually left Russia, researchers from the Swiss University of St. Gallen (HSG) and the business school IMD have found.

"Our analysis shows that by the end of November 2022, 8.5 percent of EU and G7 companies had divested at least one of their Russian subsidiaries," write study

authors Simon Evenett


Niccolò Pisani


So there can be no question of a large-scale withdrawal.

For their analysis, the two professors - Evenett is a trade expert at the HSG, Pisani focuses on globalization issues - collected extensive data on capital investments by foreign companies headquartered in the European Union (EU) and the G7 countries and checked whether disposals of their Russian subsidiaries confirmed after the outbreak of the Ukraine war.

They even classified the companies as "withdrawn" if they had sold one or more - but not necessarily all - subsidiaries in Russia.

Only 120 companies have left Russia

The result: Of the 1,404 companies based in the EU or G7 countries that had a total of 2,405 subsidiaries or active equity interests in Russia before the Russian invasion, just 120 had withdrawn nine months into the war.

A total of 14 companies have withdrawn from Germany, including the above-mentioned Deutsche Bank, Deutsche Telekom, Siemens, Vaillant and Tönnies, the study lists.

The low rate of withdrawal of Western firms goes hand in hand with previous research from the Kyiv School of Economics (KSE), which found that only 5 percent of all foreign-based firms left Russia.

In their current study, Evenett and Pisanie write that the pressure to break off business relationships is particularly high for companies from EU or G7 countries.

It is therefore not surprising that the proportion in their study is somewhat higher.

In particular, "underperformers", i.e. companies with low profitability, and companies with large employees withdrew from Russia.

After all, the confirmed divestitures account for just 6.5 percent of total pre-tax profits of all EU and G7 firms with active operations in Russia, but 15.3 percent of total employees.

The study authors suspect that the size of the workforce in particular could have contributed to the fact that the companies were perceived more strongly by the public.

More US companies are pulling out

According to the study, more US companies left Russia than those based in the EU, Japan, Canada, Great Britain, Italy or France.

A total of 30 US-based companies withdrew, 15 from Finland, 14 from Germany and 13 from the UK.

It is also striking that the profitability of European and Japanese companies that withdrew was often very low.

In total, according to the professors' count, 1,284 of the EU or G7 companies are still active in Russia.

Most of them: from Germany, namely around 250. The second most active companies are based in Cyprus, although according to the study, as in Luxembourg, it is often likely that they are actually Russian companies that only have their headquarters there to have.

Above all, companies from the areas of agriculture and raw materials extraction have remained in Russia, while companies from the manufacturing and service sectors have tended to withdraw.

For example, the agricultural machinery manufacturer Claas from Harsewinkel in Westphalia is still clinging to Russia, as are confectionery manufacturers Storck and medical companies such as Braun and Fresenius, as Yale University recently listed.

For some, withdrawal is delayed

Evenett and Pisani explain that there are many reasons for companies that are still active in Russia to stay there.

In some cases, for example, companies do not want to abandon their Russian customers, who are neither involved in the decision to invade Ukraine nor in the war themselves.

In other cases, companies may not want to lose long-term relationships with their employees or suppliers;

or they decide not to discontinue their activities in Russia due to the social relevance of their products and services, such as medicines.

The authors also see the hurdles in withdrawing as another possible reason why so few companies have left Russia so far.

Even if a Western company has decided and publicly committed to pull out, it can eventually fail.

For example, some cannot find a buyer for the subsidiary who is willing to pay the required sum.

For others, obstacles imposed by the Russian government, preventing the proceeds from being transferred abroad, complicate or delay the sale.

Due to these sometimes complex and lengthy processes, the authors of the study expect an increasing number of sales in the future.

At the same time, they warn that many Western companies, such as Nissan and McDonalds, have left the buyback option open in their contracts.

A completed retreat does not always mean the end.

Source: spiegel

All news articles on 2023-01-23

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