Last week, McDonald’s was one of the major companies to announce that it would temporarily shut down its 850 Russian restaurants. PepsiCo and Cola-Cola quickly followed suit . Other chains like Burger King, Papa John’s and Little Caesars also followed . On March 11, Deutsche Bank announced it was “winding up” its Russian business. The German financial giant was criticized for initially stating that it would continue certain activities in Russia.
Russian prosecutors warned that assets could be taken from existing companies and that CEOs who criticize the government could be arrested. The Wall Street Journal reported citing people familiar.
Caterpillar blamed “supply chain disruptions” and sanctions for its March 9 decision not to operate at its Russian manufacturing plants. The maker of construction equipment and mining equipment said that it recognizes the time is difficult for its valued employees and will continue to seek ways to support them.
The Peoria, Illinois-based company opened its first Russian office in 1973. It has a parts distribution center in Moscow and a manufacturing facility in Tosno near Saint Petersburg. Jeffrey Sonnenfeld, a Yale University management professor, said that Russia accounts for approximately 8% of Caterpillar’s annual revenue or $4 billion.
According to Sonnenfeld’s tally, more than 30 large Russian companies “remain in Russia with substantial exposure,” which is updated daily by Sonnenfeld.
Sonnenfeld stated that the goal of calling out companies was to force them to cooperate with the U.S. government, and its allies, which have imposed economic sanctions on Russia. He stated that government sanctions “rarely succeed entirely alone — they require fairly universal support from the business community in order to paralyze an economic economy as intended.”
Sonnenfeld stated that economic sanctions combined with a large corporate pullout from South Africa in the 1980s helped to undermine the apartheid system of institutionalized racism. Sonnenfeld also stated that he has heard from CEOs who are frustrated by boards being stuck in a 1990s mind-warp.
The professor spoke out about Russia’s war against Ukraine, saying that there was no “middle ground”.
Sonnenfeld said that companies that express “humanitarian concerns” for Russian citizens are not understanding the purpose of sanctions. They only work when the “tyrant ceases to be a successful totalitarian.”
Doing business is still possible
The Illinois-based Abbott Labs is one of the large businesses that chose to keep their Russian presence. On March 4, Abbott, one of the companies that condemned the war said it would donate $2,000,000 to humanitarian organizations offering assistance in Ukraine. In its statement, the multinational health care and medical device company didn’t mention Russia.
Direct sales giant Amway has at least 500 employees in Russia. The company employs a multi-level marketing model that generates around $200 million in revenue. In a statement published March 4, Ada, Michigan-based Amway stated that it was “saddened” by the conflict and destruction in Ukraine.
After an 11-year absence , there are 21 franchised-owned Dunkin Donuts. In Russia, the Canton, Massachusetts-based coffee and sweets brand has returned to business in 2010. On March 11, the company informed Yahoo Finance that it had stopped all “current investment and development” in Russia. However, it noted that it cannot legally close independently-operated franchises.
Sonnenfeld also includes Tokyo-based tire- and rubber-products manufacturer Bridgestone Tire. Although it has manufacturing plants in Russia and is active in other areas of the business, its exact extent in Russia is not known.
Cargill has stopped investing in Russia and is ceasing business activities, according to the U.S. agricultural giant . However, stated that it will continue to provide what it calls “essential food facilities and feed facilities” for Russians. The company stated that the region played a crucial role in our global food system. It is also a source of key ingredients for basic staples such as bread, infant formula, and cereal.
According to Sonnenfeld, Cargill gets $1.1 billion in revenue from Russia, which has 2,500 employees. Cargill claimed the $1.1 billion figure was inaccurate. However, a spokesperson for the company stated in an email that the company doesn’t disclose financial information at the country level.
Citigroup will expand on the previously announced Russian exit from its consumer banking business. declared March 14. This decision will be difficult to implement due to the nature and complexity of financial services operations. Citi stated that it will no longer solicit new clients or business as it assists multinational corporations in Russia to wind down their Russian business.
According to a regulatory filing dated February 28, Citi has $9.8 Billion in Russian exposure, both domestically and internationally. This stake is much greater than Wall Street rivals Goldman Sachs or JPMorgan Chase which announced their withdrawals from Russia on March 10.
General Mills, a Minneapolis-based manufacturer of Cheerios, and other packaged foods, has a joint venture called Cereal Partners Worldwide (or CPW) with Nestle that operates in Russia. General Mills’ $118 million sales last year were generated by CPW. This is less than 1% of its total sales which reached $18.1 trillion in 2021.
CPW has stopped capital investment in Russia and “we will continue being in close communication with Nestle when the situation unfolds,” a General Mills spokesperson said in an email on March 10.
Nestle announced on March 9 that it had stopped advertising and capital investment in Russia but would still continue to sell essential food products there. Nestle, the largest food company in the world, stated in a statement that it is a responsible employer and food company towards Russia’s more than 7,000 employees.
According to Bloomberg News, oilfield services company Halliburton receives as much as 22% of its revenues from Russia according to a J.P. Morgan estimate. The company had $15.3 Billion in total revenue for 2021.
Multilevel marketing company Herbalife Nutrition receives 2.7% of its revenues from Russia and Ukraine.
On March 9, hotel chain Hyatt stated that it would suspend development activities in Russia and make new investments. It also said that it will continue to evaluate Russian hotel operations. Hyatt stated in a March 4 statement that it was heartbroken by the destruction in Ukraine and had set up a relief fund to help colleagues who were in dire need of assistance and necessities. According to Sonnenfeld, Hyatt still has six locations in Russia.
Koch Industries is involved in many ongoing business operations in Russia and has not indicated that this will change, Popular Information reported Monday. According to Judd Legum’s newsletter, Guardian Industries, its wholly-owned subsidiary operates two glass production plants in Russia. One is near the border with Ukraine.
According to Popular Information, Koch Industries also has two subsidiaries operating in Russia. These include Molex, a maker of electronic components. Koch-Glitsch is operated by Koch Engineered Solutions. It maintains a office in Moscow.
Marriott, a rival hotel operator, updated its statement on March 8, expressing concern about the humanitarian crisis in Ukraine. It also stated that it is working with charities to assist. At least 10 locations are available in Russia by the international chain.
The Chicago-based global advertising agency Leo Burnett maintains an office in Moscow. Its Russian clients include Russian-services provider Rostelcom.
Subway, a fast-food giant, said it would use any profits from Russian operations to support humanitarian efforts. It noted that approximately 450 outlets in Russia were independently owned and managed by local franchisees.
Despite being listed as an outlier, there are calls on social media for Subway to be boycotted and other similar businesses.
Paul Washington, the executive director of ESG Center at Conference Board, stated in a report that “Russia’s invasion of Ukraine highlighted the intersection between risk, reputation, and revenue.” The decision to suspend relations may not be difficult for many companies. Due to the Russian economy’s size, there may not be much revenue. The reputational damage of continuing business, and the benefit to announcing a withdrawal, may be substantial.
Crypto’s united front?
Some cryptocurrency companies are resisting the pressure to close Russian accounts despite an appeal by Ukraine’s vice prime Minister “asking all major crypto-exchanges to block addresses from Russian users.”
Jesse Power, Kraken CEO, replied that his company would not freeze accounts of Russian clients “despite his deep respect” for the Ukrainian people.
Binance is the world’s largest cryptocurrency exchange. However, it has blocked accounts from Russians listed on western economic sanctions lists. In a March 4 blog , CEO Changpeng Zhao stated that “We aren’t going to unilaterally freeze millions innocent users’ accounts.”
Coinbase CEO Brain Armstrong tweeted on March 4 that “ordinary Russians use crypto as a rescue” He said that the company would still comply with any bans placed by the U.S government.
Coinbase aligns its stance with other crypto exchanges like Kraken, KuCoin, and Coinberry.
