More than half of the foreign businesses that announced plans to leave Russia after the start of the Ukraine conflict have remained in the country, the Financial Times reported on Monday. A rebound in consumer activity and “bureaucratic obstacles” are making the companies stay, the outlet suggested.
British businesses such as cosmetics brand Avon and consumer goods company Reckitt, as well as French industrial gas producer Air Liquide, are among 2,173 overseas firms that continue to operate in Russia as of May 5, according to data compiled by the Kiev School of Economics. Around 1,600 firms either exited or curtailed their operations in the country, it added.
Scores of Western companies pledged to leave the Russian market shortly after Moscow launched its military operation against Ukraine in February 2022. Carmakers Volkswagen and Renault, oil and gas multinationals Shell and British Petroleum, fast-food chain McDonald’s, and Swedish furniture giant IKEA are among those that completed their exits.
Firms that left in the first weeks of the conflict saw “a moral imperative” to do so, an executive working with Western companies in Russia told FT. However, there has since been “a noticeable change in sentiment,” he added.
“The current wave is more about, ‘Do you really have to leave? Do you want to leave?’ Some of these companies have built four, five factories over 30 years. They’re not going to sell that for a 90% discount,” the outlet quoted the executive as saying.
The sale of assets to Russian buyers by Western companies requires approval by a government commission headed by Finance Minister Anton Siluanov. The Finance Ministry imposed a mandatory 50% discount on the sale of assets belonging to firms from “unfriendly” countries, and a minimum 15% “exit tax,” Russian media previously reported.
Russia’s strong economic performance is reportedly also a factor in the decision by foreign firms to remain, with the country’s gross domestic product (GDP) growing by 5.4% year-on-year in the first quarter of 2024, according to preliminary data released by the national statistics service, Rosstat. In April, the International Monetary Fund (IMF) said it expected the Russian economy to grow faster than all advanced economies this year. GDP is forecast to expand by 3.2%, exceeding the expected growth rates for the US (2.7%), the UK (0.5%), Germany (0.2%), and France (0.7%).
Real wages in Russia also grew by nearly 8% last year – the biggest jump in five years, according to Rosstat.
Mondelez, Unilever, and Nestle are also among those that opted to stay. The chief executive of confectionery giant Mondelez recently told the FT that the firm’s shareholders did not “morally care” whether the group exited the country.
Russian President Vladimir Putin set a goal earlier this month for the country to have the fourth-highest GDP – measured by purchasing power parity – in the world, by 2030. The government has announced a raft of measures aimed at transforming the country’s economy and promoting consumer spending. They include labor reforms, entrepreneurial incentives, and increased efficiency and productivity.
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