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Why certain companies choose to remain in the Russian business market


Sep 19, 2023

Jeffrey Sonnenfeld, founder of the Yale Institute for Chief Executive Officers, warns that companies choosing to stay in Russia will face a negative perception from the Russian public as the conflict with Ukraine continues. He draws a parallel to companies operating in Germany during the Third Reich, stating that they were viewed as collaborators after the war. Sonnenfeld points out that companies like Woolworths, Royal Dutch Shell, and Texaco, which continued to operate in Nazi Germany, did not benefit financially and were eventually pressured to cease activities. Texaco’s chairman, Torkild Lieber, had to resign due to public outcry over his pro-fascist sympathies and dealings with high-ranking Nazi officials.

However, there were also companies that thrived despite their involvement with the Nazi regime. IBM, for example, provided technology to the Nazis and is now a leading company worth billions. Similarly, Volkswagen, originally associated with Hitler’s “people’s car,” has become the largest car group in the world. The outcome for companies operating in Russia will depend on investors’ risk appetite and whether they are willing to face potential asset seizures or forced expulsion.

Further risks could arise if the conflict spills over into Russia itself, jeopardizing workers, factories, and other assets. Companies may also face consumer backlash worldwide, with boycotts aiming to persuade foreign companies to leave Russia. The KSE Institute’s “Russia Exit” project tracks company exits and encourages others to follow suit. Although these campaigns often attract negative attention, some companies may endure the short-term financial impact and return to business as usual.

Given the international sanctions and condemnation faced by Russia, the deteriorating economy could give remaining companies a reason to withdraw. Despite its size, Russia’s economy still lags behind that of the United States, China, and the European Union. Sidortsov, an expert, predicts that Russia’s business environment will eventually resemble that of North Korea – highly isolated with minimal business connections to the outside world, primarily through allies like China. He believes that foreign-affiliated companies may dwindle over time until few remain.

By Editor

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