Western companies rethink Russia exit as Kremlin raises barriers

Major brands like Nestle, Unilever, Philip Morris and Mondelez have become increasingly open about their intentions to hold onto their Russian businesses. Mondelez’s CEO bluntly told the FT that investors do not “morally care” about the company operating in Russia.

Scores of Western companies that remained in Russia after Moscow’s invasion of Ukraine are now reconsidering their exit plans, confronted by escalating Kremlin-imposed hurdles and rebounding consumer demand, according to the Financial Times.

As of last month, data from the Kyiv School of Economics showed that 2,175 foreign companies have stayed put in Russia, compared to 1,610 that departed or scaled back operations in the wake of harsh sanctions.

Major brands like Nestle, Unilever, Philip Morris and Mondelez have become increasingly open about their intentions to hold onto their Russian businesses. Mondelez’s CEO bluntly told the FT that investors do not “morally care” about the company operating in Russia.

For those still seeking an exit, the path has become significantly more obstructed. Moscow has imposed an array of punitive policies, including mandating that foreign businesses sell assets at a minimum 50% discount to buyers approved by Russian authorities.

A 15% exit tax has been levied, while incoming offers must clear Western sanctions screenings as well as receive the Kremlin’s blessing – requirements that have scuttled multiple prospective deals.

The cosmetics giant Avon walked away from offers to sell its Russian subsidiary, while the French firm Air Liquide did not secure Russian approval to offload its assets there. And Reckitt, the British consumer goods maker, halted an asset transfer after commencing the process.

The spectre of nationalization has added to corporate jitters about abandoning the Russian market. After announcing plans to divest, Danone and Carlsberg had assets seized by Moscow before the French food company eventually sold at a forced discount. Carlsberg remains locked in a legal battle.

With the Kremlin erecting higher barriers and domestic consumer spending proving resilient, a growing number of foreign businesses now appear to be shelving Russia exit plans – at least for the foreseeable future.