Since Russia’s full-scale war on Ukraine began, 1,119 international companies have curtailed Russian operations, and only 114 have pulled out from Russia entirely. Moreover, for some, seven months of the war have been enough time to leave the country and return.
The B4Ukraine coalition puts in the spotlight the five crafty ways multinationals use to come back to Russia despite the war and calls on companies that have left the country to stand by those commitments. There can be only one ethical way to return to Russia – once the territorial sovereignty of Ukraine within internationally recognized borders is restored and accountability is imposed for war crimes and the destruction of Ukrainian infrastructure and property.
Continental is a German manufacturer of tires, automotive electronics, and other components and has some 1,300 employees in Russia. According to the company’s CFO Katja Duerrfeld, the Russian market generated less than 1% of the company’s global revenue. The company had some 5% of the local tire market, the Russian tire blog reports.
In March 2022, the company announced the suspension of its production in Russia in response to the war on Ukraine. However, the company stood by its commitment for only a month. Already in mid-April, the company announced that it “temporarily” resumed tire production for passenger cars at its Russian plant in Kaluga “in order to protect our employees in Russia from prosecution.” Reportedly, since then, the company has continued paying salaries to the employees and launched production in August after it optimized the logistics and found new suppliers to ease pressure on production due to sanctions.
If six months ago a justification for resuming production “for the sake of employees” could save the company from a backlash, now, after the launch of the mobilization in Russia, this excuse is no longer viable. As multinationals are now obliged by Russian law to assist the Kremlin with conscripting soldiers from the ranks of employees, it’s time for Continental to revisit its “temporary” decision - unless it wants to send its 1300 employees to the war.
Justifications for continued business with Russia that are built around the care for employees are not rare. However, they do not always imply the employees in Russia, as the case of the world’s second-biggest steel producer shows.
According to Bloomberg, in March 2022, ArcelorMittal eliminated Russian commodities from its supply chain. As the media reported, the steelmaker previously sourced about a fifth of the coal for its European mills from Russia and bought iron ore from sanctioned billionaire Alisher Usmanov’s Metalloinvest. “Russians have always been very opportunistic,” the company’s European CEO Geert Van Poelvoorde commented then. “There will be a world re-balancing.” In May, the company also halted exports to Russia.
However, a month after suspending supplies, the company resumed steel deliveries to Russia directly from its plant in Kazakhstan. The company explained that it changed its mind to stay out of Russia for the sake of its employees – those in Kazakhstan. “Having given very careful consideration to the situation, sales of basic products from AMT to Russia were resumed as the only alternative to protect the viability of the mill and the livelihood of its 35,000 employees,” ArcelorMittal said. The decision came even though ArcelorMittal also owns significant steel and mining operations and employs 26,000 people in Ukraine.
In Russia, the Japanese company Mitsubishi is famous not only for its vehicles but also as a participant in energy projects. Mitsubishi, together with Shell and Mitsui, owned a stake in a joint venture in the Russian LNG project at the Sakhalin. As the war broke and democratic countries started to impose sanctions, the Kremlin transferred the stakes of the Sakhalin project from a Bermuda-based operator to one in Russia. For a moment, all multinational participants of the joint project were formally stripped of their assets in the Russian project. Then, the Kremlin forced the former owners of the stakes to either regain stake in a new operator or lose ownership. While Shell chose the latter, Mitsui and Mitsubishi opted for the former. Now, they hold 12.5% and 10% respectively in the new operator Sakhalinskaya Energia.
Reuters reports that the Japanese government plans to support the trading companies in their attempts to stay in the Sakhalin-2 project. Japan imports about 10% of its LNG from Russia, mainly from Sakhalin-2. This highlights that even countries that have openly supported Ukraine in times of war still depend on the aggressor state and, as a result, tolerate and even encourage the companies to come back to Russia and get involved with the war against which they stand.
In March 2022, Authentic Brands Group (ABG), the current owner of the Reebok brand, announced it had temporarily ceased all branded stores and e-commerce operations in Russia, becoming one of the last sports brands to leave the country.
However, several months later, ABG sold its Russian business, including almost 100 Reebok stores, to the Turkish shoe retailer FLO Retailing. The deal came shortly after another deal between the companies that allowed FLO to design, produce and distribute Reebok’s products in 12 countries. Now, the Turkish company will reopen closed Reebok stores under the name Sneaker Box that, according to Forbes Russia, will sell the same sportswear under the Reebok brand.
So, while the previous owner has distanced itself from the war, the brand remains present in Russia and will continue to be capitalized on by another multinational company.
Unlike previous cases, the story of WizzAir is a story of the unsuccessful return to Russia. The Hungarian low-cost airline ceased flights to Russia in the early days after the full-scale invasion back in February 2022. However, in August, it announced that its Abu Dhabi subsidiary would resume flights to Russia due to the increased demand.
The announcement caused an enormous backlash on social media. To counter the wave of backlash company decided to provide 100,000 free tickets on all continental European and UK flights for Ukrainians. To add to that, the company issued a statement explaining its move: “Wizz Air Abu Dhabi is a national UAE carrier that operates in line with the UAE’s national regulations and policies… All the UAE national airlines are currently operating direct flights between the two countries.”
Neither free tickets nor the explanation helped. Five days after the initial announcement, the company suspended its decision to resume flights to and from Russia. The official statement didn’t mention the backlash and calls to boycott the airline and explained the delay with industry supply chain limitations. However, the Hungarian company’s case teaches all multinationals a valuable lesson: resuming operations in Russia comes at a cost.