On a Thursday morning in early February, roughly three dozen Russia-based managers for some of the West’s biggest blue chip multinationals gathered on the top floor of Moscow’s Baltschug Kempinski hotel for a multihour networking and briefing session on Russia’s business climate.
As he outlined his assessment of the different elements affecting the region’s business prospects to executives from Domino’s Pizza, Mondi Plc and others, Mr. McNamee pegged the likelihood that the Ukrainian crisis would escalate to some kind of military conflict at 30 per cent. A full-scale Russian invasion with the aim of overthrowing the government in Kyiv? Five to 10 per cent.
But this isn’t simply a fight being waged by political leaders. A growing wave of international business has lashed out against Russia with previously unfathomable force, halting operations there, breaking off joint venture partnerships and unwinding investments – and not just to protect their own interests.
Customers queue in an IKEA store in Moscow on March 3. On March 4, IKEA announced that it is temporarily closing its stores in Russia and pausing all sourcing in the country.Russia has been trying to counter the exodus and has put in place new capital controls to prevent Western firms from selling Russian-based assets. Nor should it surprise anyone if the regime simply seizes their assets in the country, a prospect some European banks are already warning might happen.
Those same companies are acting with urgency now. Automaker Ford Motor Co. suspended operations in Russia, Disney stopped releasing films in the country and Apple Inc. halted sales of iPhones and other products as it condemned Russia’s invasion of its neighbour. International shippers such as Maersk and Hapag Lloyd have stopped taking bookings in and out of Russia as the country becomes increasingly shut out of world commerce.
Ski-Doo maker BRP Inc., which has been active in Russia for nearly three decades and has an office in St. Petersburg, paused its exports to Russia, citing “the instability of the current situation and the trade complexities.” Auto-parts manufacturer Magna International idled its Russian plants and luxury parka maker Canada Goose suspended all sales in Russia and donated $100,000 for humanitarian aid in Ukraine. Bombardier Inc.
“No one rushed out of Saudi Arabia when it started bombing Yemen” in 2015, Mr. Valoshin said. “This time is different because of the tactic Mr. Putin chose. Had he limited his actions to the recognition of the Donetsk and Luhansk [republics] in Eastern Ukraine, no one would have budged an inch. It’s the fact that he launched all-out aggression against a sovereign state with the stated intention to topple its democratically elected government that led to the situation we are in.
Employees and alumni of big Western firms have also taken to social media in droves to shame those companies that were perceived to be dragging their feet. One former senior partner at McKinsey & Company blasted the consulting firm’s managing partner Bob Sternfels on LinkedIn on Tuesday for having “blood money on your hands” for failing to exit Russia. Dozens of similar messages from ex-McKinsey employees filled the site.
Even after Russia invaded and annexed the Crimean Peninsula from Ukraine, Western businesses remained interested in Russia, Mr. Naumovski said. And those that wouldn’t or couldn’t do business there because of subsequent government sanctions, such as Canadian pork producers, actually helped Russia to become more self-sufficient in sectors such as food and beverages. He said he believes that might have emboldened Mr.
Russians queue to withdraw cash from at ATM in a Moscow shopping mall on Feb. 27. Already there has been a run on banks as people try to withdraw savings before their purchase power is destroyed by a plunging ruble.Back in Canada, David Ross had been nervously following the buildup of Russian troops on Ukraine’s borders for weeks.
Since then Mr. Ross has watched as scores of other global businesses have also amputated their exposure to Russia. He sees it as a natural extension of a growing awareness among businesses that they have responsibilities that go beyond the bottom line.