Under current politics, Western companies are faced with the choice, cooperate with regime or lose everything. Russia sanctions in extrema or Russian roulette. The recent seizure of assets from French yogurt producer Danone and Danish brewer Carlsberg by Russian President Vladimir Putin has presented Western companies that have remained in Russia despite the war against Ukraine with a difficult choice: cooperate with the regime or try to leave and risk losing everything.
Putins justifies the seizure. He argues that the management of these companies tried to put pressure on Russian citizens. This has caused much concern among Western companies. They fear they could be next. The consequences of such actions were triggered by the war. Moscow’s seizure of Carlsberg and Danone is just the tip of the iceberg. Western companies feel like hostages to Putin.
Leaving Russia, however, is not an easy option. We also see this in reports of companies still in Russia. The business climate in Russia continues to deteriorate. Western companies that have not yet exited the Russian market face increasing disadvantages. Many executives now regret not leaving the Russian market at the start of the war. This involves the important role of an experienced Export Controls Officer. The officer could have informed the board correctly.
The ultimate winners will probably be the Chinese companies. This since their government still has significant influence over Putin and can fill the vacuum created by the departure of Western companies. According to data collected by the Kyiv School of Economics, Chinese banks quickly entered the Russian market. China’s ICBC Bank and Bank of China grew by more than 300 percent and more than 400 percent, respectively, in the past year. They could have further opportunities if Austria’s Raiffeisenbank and Italy’s UniCredit, both still major players, decide to leave.
In short, Western companies in Russia face a difficult choice. A choice that could have serious consequences. Cooperation with the regime might be the only option for some. This poses significant risks, especially as sanctions are becoming increasingly stringent and are not accepted by the Russian regime. In other words, if a company chooses to do this, the possibility of an unworkable situation arises. Where the company is required to break the sanctions law in Russia while you break the law in the country of residence or vice versa.
Here one can rightly speak of a Russian roulette. With today’s knowledge, different choices might have been made.
Leaving Russia is also not an easy option. This as the business climate continues to deteriorate. Western companies that have not yet exited the Russian market are experiencing increasing disadvantages. It remains to be seen what the final outcome will be. What is clear is that companies looking to leave Russia eventually will regret not having done so when it was a viable option.
Check out the full article on POLITICO for more information.
If you would like more information about the Supply Chain Act and what it means for you, please take Contact us.
Trade Controls Compliance Contact Form
Your Sanctions & Export Controls Toolbox
If you have any questions about our services or are interested, please contact us using our contact form. With our Trade Controls Compliance contact form you can leave your details with us, then we will contact you. If desired, you can already provide more details about your issue in the field of export control, supply chain security or trade compliance.
We handle your information carefully in accordance with privacy laws and aim to respond to your message within two business days.
Thank you for your interest in Trade Controls Compliance.