From Whoppers to Magnums: The firms staying put in Russia despite Ukraine war
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Some Western companies still operating in Russia are pausing their plans to exit, despite the continued efforts to isolate the country’s economy.
The invasion of Ukraine sparked a mass exodus of multinationals from the Russian market, wary of a potential consumer backlash should they stay.
Starbucks and McDonald’s were among those to pull out as the West unleashed sanctions on Moscow and sought to isolate Russia’s economy.
But nearly two and half years on, more than 2,000 foreign firms remain in Russia, according to the Kyiv School of Economics.
That is compared to around 1,750 that have either scaled back their operations or left completely.
The price and difficulty of corporate withdrawal have both significantly increased since the start of the war in Ukraine, as the Kremlin has sought to minimise capital outflow.
Chris Weafer, an investment strategist who has worked in Russia for more than 20 years, told Sky News the mounting cost and bureaucratic barriers have caused some clients to put departure plans on hold.
“There is a sense that maybe it is too late to leave,” he said.
“Most companies that are still here have the attitude of let’s keep our head down and hope conditions change and we won’t have to leave.”
Companies from so-called “unfriendly” states are now forced to sell their assets at a 50% discount.
The Russian government also charges a 15% exit tax on top, but only if the buyer (which must be local) is approved.
According to Mr Weafer, it is part of the Kremlin’s “messaging” to show Russians it can “overcome” the economic constraints imposed by the West.
“When Russian people go to the stores and see the same Western brands that they’ve always been used to, then it fits the message coming from the Kremlin which is that life is normal, that Russia’s been able to withstand the sanctions,” he said.
Consumer goods giant Unilever is among those still operating in Russia.
The consumer goods giant says it ‘understands’ calls to leave the country
Despite condemning the war and scaling back its business, the UK-headquartered company continues to manufacture, among other things, Cornettos and Magnums for the local market.
Burger King is among other prominent Western brands still visible in Moscow, despite promising to quit Russia soon after the war began.
Maintaining a presence in Russia is not a breach of sanctions, but companies are contributing to the economy, and as such, have attracted criticism from campaign groups.
“These Western companies that are still doing business in Russia don’t have a moral bone in their body,” Mark Dixon, founder of The Moral Rating Agency, told Sky News.
“It’s idiotic, for the West to be pumping money and helping Ukraine which it should be doing, while its own companies are propping up the Russian economy.”
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Explaining its decision to remain in Russia, Unilever has previously said it did not want to abandon its staff.
It has also expressed a fear a departure would see its assets appropriated by the state.
The fast food chain suggests its franchise structure prevents it from exiting
When approached for comment, Unilever referred to a statement made by chief executive Hein Schumacher in October 2023, which said: “It is clear that the containment actions we have taken minimise Unilever’s economic contribution to the Russian state.
“However, I understand why there are calls for our company to leave the country, and we continue to look at our options.”
Burger King’s owner, Restaurant Brands International (RBI), has previously suggested the restaurant’s franchise structure prevents it from exiting.
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The Canadian-American company owns 15% of the business in Russia and, after the invasion, it claimed its local partner refused to close.
The local partner did not reply to a request for comment.
In a statement, RBI told Sky News: “We cut off all corporate support for the Russian market in March of 2022, including operations, marketing, and supply chain support, in addition to refusing approvals for new investment and expansion.
“RBI has not made any profits from Burger King in Russia since early in 2022.”
Outside one branch of Burger King near Moscow Zoo, some diners spoke of their delight at still being able to eat there.
“I’m very happy that at least someone stayed with us,” Irina told Sky News.
Fyodor, accompanied by his family, was more cynical: “It seems that for many corporations, money is much more important than their image.”