Russia: cost of departure of Western companies – $107 billion

The exit of companies after the invasion of Ukraine two years ago cost 107 billion euros. Losses have increased by a third compared to August last year, when the last record was recorded, and the economic blow to Western companies from sanctions against the Russian Federation has been described as particularly strong.

Companies are forced to accept large losses

“As the Russian invasion continues, with Western military aid waning and Western sanctions intensifying, companies still seeking to exit Russia are likely to face new challenges and be forced to accept the possibility of greater losses,” said Ian Massey, chief executive of Corporate Intelligence.

Vladimir Putin, who just days ago won re-election, believes he has received a clear mandate from the Russian people to further isolate himself from the West. Moscow demands discounts of at least 50% on the sale of foreign assets and has tightened requirements for exiting the country, often accepting fees of as little as one ruble.

This year, the sale of assets owned by Shell, Polymetal International and Yandex NV has already been announced for a total of about $10 billion with discounts of up to 90%. Last week Danone announced it had received regulatory approval to sell its assets in Russia at a loss of $1.3 billion.

According to an analysis by the Yale School of Management, about 1,000 companies have left Russia, although some, such as Auchan and Benetton, continue to operate or have simply suspended their operations in Russia.

Russian countermeasures

Western countries froze about $300 billion from the Bank of Russia's gold and foreign exchange reserves after the invasion of Ukraine. Germany nationalized the Gazprom plant, renaming it “Safe”, and transferred the Rosneft oil refinery in the city of Svend under German control.

Russia promised to take retaliatory measures to the proposals EU on the redistribution of billions of euros in interest collected from its frozen assets, warning of catastrophic consequences and calling it a “robbery” against it. At the same time, Western banks are afraid of litigation that any arrest could cause.

Russian news agency RIA has estimated that the West will lose at least $288 billion in assets and investments if Moscow retaliates. According to the report, the calculation is based on data according to which direct investments by the European Union, G7 countries, Australia and Switzerland in the Russian economy at the end of 2022 amounted to $288 billion.

The same report states that EU states hold frozen assets worth $223.3 billion, of which Cyprus holds $98.3 billion, the Netherlands $50.1 billion and Germany $17.3 billion. Reuters reports that it could not verify the figures given by RIA.

Moscow's hardline approach has also caused serious problems in Russia. Lawyer Jeremy Zucker, an expert on sanctions issues, said that many of the company's clients across a wide range of industries have decided to leave Russia altogether and are unlikely to return even after the end of hostilities.

Companies that remained in Russia

The 2022 decree prohibits investors from “unfriendly countries,” that is, those that have imposed sanctions, from selling stakes in large energy projects and banks without the president’s permission. At the same time, many companies producing consumer goods do not intend to leave Russia altogether, arguing that ordinary citizens of the country rely on their products.

Companies still operating or doing business in Russia include Mondelez International, PepsiCo, Auchan, Nestle, Unilever Reckitt and British American Tobacco. Others, including Intesa Sanpaolo, face bureaucratic obstacles when trying to leave the country.

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