Since the beginning of Russia’s full-scale war against Ukraine, some 1,115 foreign companies have curtailed operations in Russia. Also, another 126 companies have completed the sale of their business in the country, according to the KSE Institute, a member of the B4Ukraine coalition. However, the pace of the multinationals pulling out from Russia has slowed significantly.
While the percentage of companies that closed operations in Russia rose sharply from the end of February to mid-March, in September, the ratio of those, who left or stayed remained virtually unchanged. The KSE Institute has collected a database of around 3,000 companies that were operating in Russia before the launch of the full-scale invasion, and four out of every ten such companies continue doing business without at least reducing their operations in the country as of October 9. That is 1,169 multinationals.
So, why do international companies stay in Russia, and what makes them leave? The research by the KSE Institute has shown that if a company originates from a country that has introduced sanctions, it increases the chances that it will exit the market by 5.1 times compared to companies whose countries of origin have not imposed sanctions.
Companies from the fields of industry, real estate, and technology are more inclined to leave Russia, while those from the healthcare industry – want to stay (the companies themselves – mainly well-known pharmaceutical brands – explain this decision by a concern for the health of Russians).
Companies with larger local revenues and public companies are also inclined to leave the market: perhaps, large multinational corporations are more responsible for their reputation and respond to investors’ requests. In addition, likely, leaving the Russian Federation is not as painful for them as it is for smaller companies.
“Companies that come from countries that have not introduced state sanctions have been working on the Russian market for ten years, and the share of revenue in global business is at least 10%, all other equal conditions being, have a chance to stay almost 14 times higher,” explain analysts.
Therefore, the stronger sanctions pressure on Russia and public dissatisfaction with companies that remain in the country impact companies and increase the chances that they will finally leave the Russian market.