Companies Find It Hard to Leave Russia

"Events in Ukraine triggered a wave of promises by global businesses to exit Russia. 

A year later, many of those companies are still there.

Hard Rock International closed its Hard Rock Cafe in Moscow but says it is negotiating the end of a franchise agreement with an independent restaurant operator in St. Petersburg. Volkswagen AG, Europe's biggest auto maker, stopped sales and production of cars in Russia and says it is in advanced discussion to sell its subsidiary there.

Even after finding a buyer, some companies say they are struggling to close deals, in part because of sanctions. British American Tobacco PLC, which makes Lucky Strike cigarettes, started discussing a transfer of its Russia business in March 2022. It is now in advanced talks with a consortium including the business unit's current managers and its Russian distributor, but doesn't expect to close until later this year.

"I have to make sure things are done properly, before the exit and after the exit," BAT Chief Executive Jack Bowles said. "We want to make sure we do it the right way."

More than 1,000 multinational companies have left or substantially curtailed operations in Russia, according to the Chief Executive Leadership Institute, an arm of the Yale School of Management, which has compiled a database of the corporate exodus.

The institute grades a total of 1,586 companies in its database on a scale from A to F. Companies given an A have made a "clean break" with Russia, the institute says, based on a frequent review of company statements, filings and media reports. An F is given to companies that haven't exited or reduced activities. There are about 417 companies with grades of D or F on the list, or 26% of the total, as of the end of February.

Some companies that have quit Russia are hedging their bets. French auto maker Renault SA and brewer Carlsberg A/S have both said they sold businesses in Russia for symbolic values but both also say they retain the right to come back to Russia eventually.

Russia hasn't made getting out easy. In December, the Kremlin adopted rules requiring the Russian government to conduct an assessment of the market value of any asset for sale by a foreign company. The seller is then required to sell the asset at a 50% discount of that value.

Philip Morris International Inc., which sells Marlboros overseas, said it is doubtful it will be able to divest as it had once promised. It cited both the Russian government's labyrinthine rules and a duty to shareholders to get a fair price for the company's $2.5 billion in assets there.

Shortly after the ruckus, British oil company BP PLC said it would exit Russia. A year later, BP is still trying to leave, including disposing of its nearly 20% stake in Rosneft, a state-backed Russian oil producer. BP took a $25 billion pretax accounting charge on its Russian assets last year and removed its executives from Rosneft's board. But BP still holds the stake. "We continue to actively pursue options to dispose of our Rosneft shareholding," a BP spokesman said.

Exxon Mobil Corp. also promised to quickly exit Russia. After Russia's 2014 reunification with Crimea, Exxon withdrew from at least 10 joint ventures with Russian partners, but remained in a venture to exploit oil-and-gas deposits off Sakhalin Island that was launched in 1996. Then, after s in Ukraine in February, Exxon said it would withdraw from Sakhalin. In October, the company said Moscow had "terminated our interests" in the Sakhalin project and transferred the assets, which Exxon had valued at around $4 billion, to a Russian operator.

German auto makers VW and Mercedes-Benz Group AG said they are planning to fully sell their holdings in Russia. VW says it is still looking for a buyer. Mercedes says the sale of its assets have been held up by government bureaucracy.

Mercedes last year sold its shares in the Russian automobile dealership JSC Avtodom to Avtodom. Mercedes said it has also received permission to sell its Russian subsidiaries to Avtodom, but that deal still needs a final approval." [1]

 

Everything is simpler in Lithuania. Landsbergiai are starting to scream on social platforms and our businesses are leaving with huge losses. You say, what are the Kindergarten teachers Landsbergiai doing here? Everything starts from Kindergarten in Lithuania, and everything ends with Kindergarten. Tremble, all of you. Strength.

 

1. Companies Find It Hard to Leave Russia --- Many are tangled in sanctions and Kremlin bureaucracy, or still looking for a buyer
Boston, William; Maloney, Jennifer.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 03 Mar 2023: B.6.