June 22, 2024


Business & Finance

These companies continue to do business in Russia

9 min read

The list of companies continuing to operate in Russia is shrinking by the minute, but several dozen corporations including multinational manufacturers and fast-food chains are still doing business in the country despite intense public pressure to withdraw over its invasion of Ukraine.

McDonald’s was among the big-name companies to announce last week that it would temporarily close its 850 restaurants in Russia. Cola-Cola and PepsiCo quickly followed suit, as did restaurant chains Burger King, Papa John’s, Little Caesars and others. 

Deutsche Bank on March 11 announced that it was “winding down” its business in Russia. The German financial giant had drawn fire for initially saying it intended to continue some of its activities in the country. 

Bridgestone as of Friday also will suspend activity at its sales offices and manufacturing at its tire plant in Ulyanovsk, Russia, but continue to pay its more than 1,000 workers in the country. It’s also freezing new investments in and halting exports to Russia, it said.

The decisions to withdraw or suspend operations come amid menacing warnings by Russian prosecutors that existing companies could see their assets seized and top executives critical of the government could face arrest, the Wall Street Journal reported, citing people familiar with the matter.

Caterpillar cited “supply chain disruptions and sanctions” for its March 9 decision to suspend operations at its Russian manufacturing facilities. “We recognize this is a time of incredible uncertainty for our valued employees, and we will continue to look for ways to support them,” the maker of construction and mining equipment stated. 

The Peoria, Illinois-based company opened its first office in Russia in 1973, and has a parts distribution facility in Moscow and a manufacturing plant in Tosno, near Saint Petersburg. Russia accounts for 8% of Caterpillar’s annual revenue, or approximately $4 billion, according to Yale University management professor Jeffrey Sonnenfeld.  

Twenty-seven large companies are digging in, defying demands to exit or reduce activities in Russia, according to a running tally updated daily by Sonnenfeld and his team.  

Russia considering seizing assets of companies, White House says


The goal of calling out the companies is to pressure them to work in concert with the U.S. government and its allies that have imposed economic sanctions against Russia, Sonnenfeld told CBS News. Government sanctions “rarely succeed completely alone — they need fairly universal support of the business community to truly paralyze an economy as intended,” he said. 

For example, starting in the 1980s the combination of economic sanctions and a widespread corporate pullout from South Africa, led by General Motors, helped undermine the country’s apartheid system of institutionalized racial segregation, Sonnenfeld said. He also said he’s been hearing from CEOs frustrated with boards “caught in a 1990s mind warp, where we thought, ‘Well, we’re going to have to find a middle ground here.'”

“There’s no middle ground here,” the professor said of Russia’s war in Ukraine. 

Companies voicing “humanitarian concerns for the general Russian citizenry” are missing the point of the sanctions, which only succeed when the “tyrant is no longer a successful totalitarian,” Sonnenfeld added.

Still there, doing business

Large businesses choosing to maintain their presence in Russia include Illinois-based Abbott. Among companies condemning the war, Abbott on March 4 said it would donate $2 million to humanitarian groups offering relief in Ukraine. The multinational medical devices and health care company made no mention of Russia or Abbott’s operations in the country in its initial statement. 

The company, which does business in more than 160 countries, on March 14 said it was suspending non-essential business activity in Russia, including new investments, business development and advertising. Abbott will still provide health care products “including life-sustaining medicines for cancer and organ function,” as it says the medical category is “generally exempt from sanctions for humanitarian reasons.”

Other pharmaceutical companies like Pfizer, Germany’s Bayer and Eli Lilly have taken the same route, halting non-essential operations in Russia but continuing to supply medications for diseases such as diabetes and cancer, Reuters reported

Ukrainian President Volodymyr Zelensky has urged pharmaceutical companies to follow others and exit Russia completely, the wire service noted. The call is backed by Yale’s Sonnenfeld.

“There are few ways for Western pharma companies to gauge what is being produced and for what purposes by their Russian subsidiaries. Hitler had a history of tampering and redirecting domestic R&D facilities — and it is all too easy to imagine Putin someday following the same playbook on biowarfare, just as he is following the Hitler playbook in crimes against humanity and targeting of innocent civilians,” Sonnenfeld wrote in a commentary co-authored with Steven Tian and published by Fortune magazine. 

But Reuters noted that some of the drug companies are backed by shareholders. “I don’t think the people should suffer for the actions of the Russian government,” Josh Brockwell, an investment executive at Azzard Asset Management, said in voicing his support for Pfizer’s decision to keep supplying Russia.

Accor — the French operator of Fairmont, Banyan Tree and Sofitel hotels — is keeping its 50-plus Russian locations open while suspending future development in the country. 

Hotel chain Hyatt on March 9 said it was suspending development activities and new investments in Russia and will “continue to evaluate hotel operations in Russia.” Hyatt in a March 4 statement said it was “heartbroken over the devastation” in Ukraine and had started a relief fund for colleagues in the region in need of necessities and relocation help. Hyatt still operates six locations in Russia, according to Sonnenfeld. 

Echoing that stance, rival hotel operator Marriott on March 8 updated its statement expressing concern over the humanitarian crisis in Ukraine and neighboring countries, saying it’s working with charitable organizations to help. The international chain has at least 10 locations in Russia.

Direct sales giant Amway employs at least 500 people in Russia, which generates about $200 million in income for the company that follows a multi-level marketing business model. Ada, Michigan-based Amway said it was “saddened by the war and devastation in Ukraine” in a statement posted on March 4. Ten days later, on March 14, Amway said it was suspending product imports and pausing operations in Russia. 

There are 21 franchised-owned and operated Dunkin Donuts in Russia, where the Canton, Massachusetts-based coffee-and-sweets brand returned in 2010 after an 11-year absence. The company told Yahoo Finance on March 11 it had halted all “current development and investment” in Russia, while noting it can’t legally close the independently operated franchises.

Cargill is scaling back business activities and has stopped investment in Russia, the U.S. agricultural giant said on March 11, but is continuing to offer what it called “essential food and feed facilities” there. “This region plays a significant role in our global food system and is a critical source for key ingredients in basic staples like bread, infant formula and cereal,” the company said.

Cargill derives $1.1 billion of revenue from Russia, where it has 2,500 employees, according to Sonnenfeld. Cargill described the $1.1 billion figure as inaccurate, but a spokesperson said in an email the privately controlled company does not disclose financial information at a country level.

Citigroup is expanding on its previously announced exit of its consumer banking business in Russia “to include other lines of business and continue to reduce our remaining operations and exposure,” the New York-based bank stated on March 14. 

“Due to the nature of banking and financial services operations, this decision will take time to execute,” Citi said, adding it would no longer solicit new business or clients as it provides assistance to multinational corporations unwinding their business in Russia. 

Citi holds $9.8 billion in domestic and cross-border exposure to Russia, according to a regulatory filing on February 28. That’s a much larger stake than Wall Street rivals like Goldman Sachs and JPMorgan Chase, which both announced their pullouts from Russia on March 10.

General Mills — the Minneapolis-based maker of Cheerios and other packaged food— has a joint venture with Nestle called Cereal Partners Worldwide, or CPW, that operates in Russia. CPW generated $118 million in sales for General Mills last year, less than 1% of the company’s total sales, which came to $18.1 billion in 2021. 

CPW has suspended capital investment in Russia, and “we will continue to be in close communication with Nestle as the situation unfolds,” a General Mills spokesperson emailed on March 10. 

Nestle on March 9 said it had suspended capital investment and advertising in Russia, but would continue to sell “essential” food products in that country. “As a food company and employer, we also have a responsibility towards the people in Russia and our more than 7,000 employees — most of whom are locals,” the world’s largest food company said in a statement

Oilfield services firm Halliburton gets as much as 2% of its revenue from Russia, according to a J.P. Morgan estimate cited by Bloomberg News. The company reported $15.3 billion in total revenue for 2021. 

Multilevel marketing company Herbalife Nutrition gets 2.7% of its revenue from Russia and Ukraine.

“Herbalife Nutrition has been in Russia since 1995 and as of February, had approximately 44,000 active distributors in the country,”  the company said in a statement on March 11. 

Herbalife “does not have any manufacturing operations in Russia—all products sold in the market are imported,” its statement continued. “[The company] will suspend operations in all 62 sales centers in Russia and will not ship product to the country. Herbalife Nutrition will donate any profit from Russia to organizations supporting Ukrainian refugees.”

Koch Industries’ wholly-owned subsidiary, Guardian Industries, operates two glass production plants in Russia that employ about 600. Outside of Guardian, Koch employs 15 people in Russia, according to the company. “While Guardian’s business in Russia is a very small part of Koch, we will not walk away from our employees there or hand over these manufacturing facilities to the Russian government so it can operate and benefit from them,” Dave Robertson, president and COO of Koch Industries, said March 16 in a statement posted by the industrial conglomerate. 

Political groups supported by Charles Koch, the right-wing billionaire who is chairman and CEO of Koch Industries, oppose broad economic sanctions against Russia, according to Popular Information, a left-leaning newsletter run by Judd Legum. 

Chicago-based global advertising agency Leo Burnett has an office in Moscow, and its Russian clients include Russian digital-services provider Rostelcom. 

Patreon, an online service that lets internet content creators earn money, continues to operate in Russia. “I don’t think individual creators should have to pay for the misdeeds of their authoritarian leader,” Patreon CEO Jack Conte told tech podcast Dead Cat. “They may disagree with the war, and I don’t want to punish them for their geographic location.”

Patreon in late February suspended a Ukrainian group’s page from its site because it violated Patreon’s policy against being used for funding weapons or military activities, the company stated in a blog post.

Fast-food giant Subway said it would redirect any profits from its Russian operations to humanitarian efforts, noting that roughly 450 outlets in Russia are independently owned and controlled by local franchisees. 

Still, being among the listed outliers is prompting calls on social media to boycott Subway and others on it. 

“The Russian invasion of Ukraine has highlighted the intersection of risk, reputation and revenue,” Paul Washington, executive director of the ESG Center at the Conference Board, said in a report. “For many companies, the decision to suspend ties may be a relatively easy one. Given the size of the Russian economy, little revenue may be involved. And the reputational harm of continuing business — and the benefit of announcing a withdrawal — may be significant.”

Crypto’s unified front?

Some cryptocurrency companies are also resisting pressure to close Russian accounts, despite a February 27 appeal from Ukraine’s vice prime minister “asking all major crypto exchanges to block addresses of Russian users.” 

Kraken CEO Jesse Power replied, saying that “despite his deep respect for the Ukrainian people,” his company would not freeze the accounts of Russian clients unless it was legally required to do so. 

The world’s biggest cryptocurrency exchange, Binance, is blocking the accounts of Russians on western economic sanction lists, but not Russians at large. “We are not going to unilaterally freeze millions of innocent users’ accounts,” CEO Changpeng Zhao wrote in a March 4 blog post.

Coinbase CEO Brain Armstrong on March 4 tweeted that “ordinary Russians are using crypto as a lifeline.” Still, the company would comply with any bans imposed by the U.S. government, he added. 

Coinbase’s stance aligns with those taken by other crypto exchanges including Kraken, KuCoin and Coinberry.