After a month of war, these companies are still fighting to leave Russia

Businesses are finding it increasingly difficult to justify continuing operations in Russia as disturbing images of death and despair emanate from Ukraine, and Western governments are taking steps to further isolate Russia economically.

The chip giant Intel is the latest global corporation to shut down business in Russia, saying in a statement Wednesday calling for a “quick return to peace”. The same day, the White House announced a new package of sanctions, which includes a ban on new investments in Russia by anyone from the United States – a measure that, according to legal experts, could speed up the departure of many more companies that remain in the country.

The investment ban comes after more than 600 multinational corporations announced plans to leave Russia voluntarily, while the country has become less attractive to those businesses planning to stay. At least 155 companies resisted According to Jeffrey Sonnenfeld, a professor at Yale University who monitors corporate investment in Russia, demands to leave or cut back there, and another 96 are holding back new investment or trying to buy time.

“You don’t have to eat at McDonald’s to feel the effects of its closure,” said Aaron Klein, a senior fellow at the Brookings Institution. “For the average Russian, the fact that Western companies are leaving Russia is a signal that they risk going back to Soviet times.”

The United States is expanding sanctions against Russia in connection with the strengthening of efficiency issues

Intel is leaving after more than two decades of business collaboration at a Moscow-based research center where teams of engineers will work on advanced chip technology for use around the world.

The company said it was suspending business operations there “immediately” in response to Moscow’s unprovoked attack on neighboring Ukraine, according to a statement Wednesday on its website. He cut off all supplies to Russia and Belarus on March 3, and had previously issued statements condemning the violence.

“We are working to support all our employees in this difficult situation, including 1,200 of our employees in Russia,” the company said in an unsigned statement. “We have also taken business continuity measures to minimize disruptions in our global operations.”

Announcing the new sanctions, the finance ministry also said it would prevent U.S. banks from processing payments on Russian debt in dollars, which would bring the country closer to default. If early sanctions were to sever Russia’s ties with the global business community, those announced on Wednesday were to make the split permanent.

“Today [executive order] to ensure a lasting weakening of the global competitiveness of the Russian Federation, ”the White House newsletter said.

The investment ban is not unequivocal for many American companies that continue to operate plants and other facilities in Russia. Over time, maintaining these facilities will require some investment, which could force the United States to scrutinize the decisions of individual companies, said Ariel Cohen, a nonresident and senior researcher at the Atlantic Council think tank.

“Is it an investment in upgrading existing production lines? If you need to replace car parts, even whole cars, does that fall under these sanctions? ” Cohen asked. “The answer lies between the Treasury and the legal explanations in each case.”

Koch Industries, which runs a major glass company in Russia, has already suspended new investments but has refused to close them.

In an e-mail Wednesday, company spokesman David Duck said Koch would “comply with all applicable sanctions, laws and regulations” regarding his activities, and that he would “closely monitor the situation and change our decisions.” if circumstances so require. “

In an email to employees on March 24, President and Chief Operating Officer Dave Robertson said abandoning his glass factories in Russia would “do more harm than good” because it would leave employees open to prosecution or harassment by Russian authorities. In addition, he added, Moscow still confiscates factories and keeps them open.

“When [Koch] if we leave these glass companies, it will give full control over the assets of the Russian government, which we believe will support their work and receive 100 percent financial gain, ”Robertson wrote.

In the letter, Robertson also said that the campaign “condemns the disgusting actions of the Russian government in Ukraine.”

Some legal experts believed that the Biden administration deliberately left the definition of “investment” ambiguous to force companies to determine for themselves how many legal risks they want to take on by continuing Russian operations. Many businesses are likely to err on the side of caution, said David Shaconi, an associate professor of political science at George Washington University.

“Companies doing business in Russia will have to spend a lot of time and resources to fully understand this new investment rule, which in turn can create sufficient motivation to exit the Russian market to avoid collisions or border crossings,” he said. said Shakoni.

“The decree prohibits new investments so that it does not affect existing plants,” the Finance Ministry said in a statement. “As usual with the execution of other orders, the Office of Foreign Assets Control of the Treasury will issue additional government instructions to the private sector. Every business faces different circumstances, and we are in close contact with the private sector to address individual issues. ”

Sonnenfeld said the investment ban is likely to have minimal impact on companies’ long-term plans, as few multinational companies want to make new Russian investments at this stage. Some may try to reconsider what is considered a new investment, as opposed to a major upgrade designed to support existing operations.

The White House continues to provide exemptions for businesses that support sectors important to humanitarian action, which include food and agricultural products, medicines and telecommunications services that connect the Russian people to the outside world.

Several U.S. corporations have cited this exception to justify continued sales there, including Cargill, one of the world’s largest agricultural companies. Last month, it suspended all investment in Russia, but said it would retain about 2,500 employees there to continue to supply “essential food” such as bread, baby formula and cereals.

For other companies, the decision to leave Russia is complicated by contracts with business partners. Major U.S. hotel chains, including Hyatt and Hilton, continue to operate hotels in the country owned by third-party companies.

A Hyatt spokesman said the company is “currently evaluating new measures and [continues] to evaluate our existing agreements with third-party organizations that own Hyatt hotels in Russia ”. Meg Ryan, a Hilton spokeswoman, said the company would continue to enforce all applicable trade sanctions.

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