BEERG Newsletter - Russia: Too late for businesses to leave?

Western businesses that have not yet exited Russia may have left it too late, with President Putin recently signing orders to seize the assets of Carlsberg and Danone's Russian beer and yoghurt-making subsidiaries. According to the Financial Times he has handed control of these assets to business associates.

The U.S. Yale School of Management has been tracking foreign investors in Russia since Putin invaded Ukraine last February. According to its senior professor, Jeff Sonnenfeld: "They really should have seen it coming, they were naïve" adding: "I wouldn't be surprised if Unilever or high-profile consumer brands, such as Benetton or PepsiCo, are next in line". 

Some 1,050 firms left Russia immediately, but about 600 are still there, even if some of them, including Danone and Carlsberg, had belatedly started the process of selling up. "That's the punishment for vacillating," Sonnenfeld told journalists, "This [Putin's corporate raid] should cause a stampede to the exit — it's ridiculously risky and foolish for them to stay there … if any EU company thinks Putin will abide by the verdict of an arbitration tribunal or any other court, that's also naïve … They have zero chance of getting their money back via legal means — it would be Quixotic and a waste of time," he said.

Every company still in Russia should simply write off their assets and move on, he added, citing Exxon and BP, who did so within days of Putin's invasion, as models. Companies fighting to keep their Russian business suffer "humiliation, reputational risks, operational risks ... it's not in the interests of the shareholders, they're better off with expropriation," Sonnenfeld said.