Scores of global corporations have cut ties with Russia over its invasion of Ukraine, with some saying international sanctions have made continued business untenable and others saying they have a moral obligation to do what they can to end the bloodshed.
Some experts, however, have expressed concern that private-sector sanctions ranging from liquor stores pulling Russian vodka off their shelves to oil giants walking away from multibillion-dollar investments will do little more than hurt Russian citizens who are powerless to stop Russian President Vladimir Putin’s invasion.
“Ninety-nine percent of the Russian people have no influence on Kremlin policy. I’m not keen on making life more miserable for ordinary Russians, which these sanctions will do,” Gary Hufbauer, a senior fellow with the Peterson Institute for International Economics, told the Washington Post.
Some companies could face substantial financial losses for severing ties with Russia.
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Russia’s largest foreign investor, British energy company BP, could see a $25 billion loss following its announcement on Sunday that it would exit from its 19.75% stake in the Russian state-controlled oil company Rosneft, which accounts for about half of BP’s oil and gas reserves.
BP chairman Helge Lund said the company’s involvement in the state-owned enterprise “simply cannot continue” following Russia’s invasion of Ukraine. However, Lund also said in his statement that the company’s divestment from Rosneft is “in the best long-term interests of all our shareholders.”
British Business, Energy and Industrial Strategy Secretary Kwasi Kwarteng said companies have a “strong moral imperative” to isolate Russia and help deliver a “strategic failure for Putin” after Shell, another British energy company, announced that it would divest from Russia.
Earlier today I spoke to Shell’s chief executive, Ben van Beurden. Shell have made the right call to divest from Russia – including Sakhalin II.
There is now a strong moral imperative on British companies to isolate Russia. This invasion must be a strategic failure for Putin.
— Kwasi Kwarteng (@KwasiKwarteng) February 28, 2022
Some experts cautioned that the West’s rapid exodus from Russia could prove to be a boon for China.
“Perhaps the only thing that is certain to me is that in the wake of the sanctions, Russia’s geoeconomic dependence on China will grow substantially,” Russian professor Artyom Lukin of the Far Eastern Federal University told the Washington Post. Lukin warned that if Russia remains “heavily sanctioned for a long time to come, it could become like Iran or maybe even like North Korea” in its dependence on China.
“Never before have we seen such a significant economy be subject to such comprehensive actions, and at the present pace, we’re seeing Russia well on its way to being spoken of in the same breath as Cuba and Iran,” Daniel Tannebaum, the global head of sanctions at the Oliver Wyman consulting firm, told NPR.
Other experts say Western companies risk damaging their reputation if they remain in Russia amid its invasion of Ukraine.
“If companies have an opportunity to pull back now, they might take it just to sort of decrease the commercial and reputational risks of having to take action,” Roberto Gonzalez, a partner at Paul, Weiss, told NPR.
Major automobile manufacturers such as GM, BMW, and Volvo pointed to international economic sanctions against Russia in statements announcing they were suspending exports to the country. Toyota cited supply chain disruptions in a statement Wednesday announcing it was suspending production in and exports to Russia indefinitely.
Credit card companies Mastercard and Visa also cited international sanctions as factors leading to their moves to block certain transactions in Russia.
German software company SAP said economic sanctions against Russia were an “important mechanism in the efforts to restore peace” in Ukraine in a statement announcing that it was pausing all sales of its products and services in Russia.
Facebook parent company Meta said it restricted access to Russian state-owned media outlets RT and Sputnik following requests from “a number of governments and the European Union.”
Google announced it would shut down financial services such as Google Pay for users with accounts with sanctioned Russian banks. However, the tech giant added that most of its services will remain available in Russia to continue “to provide access to global information and perspectives.”
Netflix said it will refuse to air Russian state television channels on its service in defiance of a new Russian law that requires the service to distribute Russian news and entertainment channels.
Many corporations left the door open to their eventual return to the Russian economy. Hollywood studios WarnerMedia and Disney, for example, announced they were “pausing” the release of their upcoming feature films in Russia as they monitor the developing situation in Ukraine.
“We will make future business decisions based on the evolving situation,” a Disney spokesperson said Monday.
Russia has maneuvered to slow the corporate exodus from its country. Russian Prime Minister Mikhail Mishustin blasted international corporations on Tuesday for caving to “political pressure” and suggested they would be prevented from selling their Russian assets until sanctions are lifted.
Small businesses in the United States have also taken measures at home to inflict economic pain on Russia, but the moves are likely symbolic at best.
At least 10 states have banned sales of Russian vodka, and some bar owners have taken it upon themselves to dump out their stocks of vodka under the mistaken impression that it came from Russia. Major vodka brands are Russian in name only, as Russia manufactures less than 1% of vodka consumed in the U.S., CNN reported.
International companies that provide food services in Russia have been hesitant to cut ties with the country.
The Swedish furniture company Ikea, for example, said Thursday it would pause all operations in Russia, but its parent company, Ingka Group, will continue operating its “Mega” malls in Russia, which sell food, clothing, and other goods in the country.
Major consulting and accounting firms have also stopped short of dropping out of the Russian economy entirely, the Wall Street Journal reported.
McKinsey & Company, which boasts on its website it provides consulting services to 21 of the 30 largest companies in Russia, said it would “no longer serve any government entity in Russia,” but the firm declined to say if it would continue to work with Russian state-controlled entities.
WeWork said Monday it has no plans to shutter its operations in Moscow, but a company spokesperson added Tuesday that WeWork is monitoring the situation in Ukraine and is prepared to shut down its business operations in Russia if necessary.
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While Putin may avoid the sting of most private-sector boycotts, at least two international entities have taken direct aim at the autocrat.
World Taekwondo stripped Putin of his ninth dan black belt, and the International Judo Federation took away his title of honorary president and ambassador.
Whether these particular acts cause Putin to pause remains to be seen, but it is probably unlikely.
