Multinationals flee Russia, punishing Moscow
Large multinational companies are fleeing Russia, joining a large swath of the international community in moving to isolate the nation in response to its brutal invasion of Ukraine.
Oil and gas giants BP and Shell announced they are leaving Russia after spending decades making investments worth billions of dollars in the country, while several U.S. companies are halting all shipments to Russia.
The exodus is expected to continue as more businesses weigh the reputational and financial risks of doing business with Russian President Vladimir Putin. Experts say that if energy firms are willing to forfeit huge sums by pulling out of Russia, industries with much less to lose will soon follow suit.
“I think corporate executives, in addition to considering political risk, are genuinely outraged by what Russia has done,” said Bill Reinsch, the Scholl chair in international business at the Center for Strategic and International Studies, adding that he is surprised by just how quickly companies have made the call to leave Russia.
These decisions are driven in part by enormous public pressure to disown the Russian government and also by the sweeping sanctions imposed by the U.S. and its allies that severely complicate companies’ ability to do business with Russian entities.
Shell on Monday said that it will abandon stakes in Russian state-owned energy projects that are worth roughly $3 billion. The Dutch company noted that the move will hurt the value of its assets and “lead to impairments.”
“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security,” Shell CEO Ben van Beurden said in a statement.
That announcement came after BP, a longtime defender of Putin, said it would desert its 20 percent stake in Russian state-owned energy firm Rosneft. The move could cost BP as much as $25 billion if the oil giant is forced to write off the investment, as selling it could prove difficult under strict sanctions.
“Russia’s attack on Ukraine is an act of aggression which is having tragic consequences across the region,” BP Chairman Helge Lund said in a statement. “BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, this military action represents a fundamental change.”
As Russia escalates its attacks on Ukraine, it’s becoming increasingly isolated from the rest of the world. American shipping companies FedEx and UPS said they would temporarily suspend all shipments to both countries, while Germany’s DHL said it would pause some services to Russia and Ukraine, citing security concerns.
Ocean carrier Maersk said Monday that it might suspend shipments to and from Russia, a move that would further cut the nation off from international trade. The Danish shipping giant said that it was monitoring the security situation in Ukraine and “preparing to comply with the ever-evolving sanctions and restrictions imposed against Russia.”
Companies that haven’t fled are likely evaluating how to navigate complex sanctions and exploring whether continuing business with Russia is worth the regulatory challenges.
In response to the Kremlin’s invasion of Ukraine, the U.S. and its allies froze roughly $630 billion in Russian central bank assets being held abroad, blocked fundraising for Russian state-owned entities and cut some Russian banks out of the SWIFT international payments system. The U.S. blocked Russian state-owned banks from accessing the U.S. dollar and imposed export controls that prevent Russia from obtaining computer chips and other technologies.
In just a matter of days, the sanctions have brought the Russian economy to the brink of collapse. The Russian ruble was worth less than 1 cent as of Monday afternoon, giving businesses yet another reason to pull out of the country.
European companies, particularly banks and energy firms, are far more exposed to Russia than U.S. businesses, which generally sought to limit their Russian investments after the U.S. imposed sanctions on Russia in 2014 for annexing the Crimea Peninsula.
Russia accounts for around 7 percent of oil imported to the U.S. but is only the 20th largest importer for all goods and the 40th largest export market for American goods, according to the U.S. Trade Representative office.
A small number of U.S. companies would face challenges if they’re cut off from Russia. Boeing has long relied on Russian titanium to build its planes but has insisted it can get materials from other countries. Both PepsiCo and McDonald’s get around 4 percent of their sales from Russia and Ukraine.
But others have already acted. Dell Technologies said that it is freezing computer sales to Russia, and Delta Air Lines suspended its ticket-buying partnership with Russian airline Aeroflot, which has since been banned from flying to much of Europe.
“Aside from the energy sector, Russia is not a huge player on our economic stage,” Reinsch said. “It’s a smart move from a consumer and political standpoint to stop trade with Russia, and it won’t cost companies very much.”
Other American companies are actively supporting Ukraine as the nation fends off Russian attackers. Airbnb said it would provide free, short-term housing to 100,000 Ukrainian refugees, while Google, Meta and Twitter have blocked Russian state-owned entities from promoting their content in Ukraine.