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Western Companies Still in Russia Are Making a Big Mistake

The moral, legal, and public relations risks of staying are huge.

By , a writer, journalist, and online safety expert based in Washington.
Customers walk past a closed shop counter at the Atrium shopping center in Moscow on March 17.
Customers walk past a closed shop counter at the Atrium shopping center in Moscow on March 17.
Customers walk past a closed shop counter at the Atrium shopping center in Moscow on March 17. AFP via Getty Images

In the summer of 2021, Lamb Weston, an Idaho-based food processing giant, signed a deal with Russia’s VTB Bank for an 11 billion ruble (or around $150 million) loan to build a second food processing plant in Russia. The agreement was sealed at the St. Petersburg International Economic Forum, where the Dutch CEO of Lamb Weston/Meijer, the European arm of the company, flew in for it.

At the time, there was no problem with this deal. But now, VTB Bank is under U.S. sanctions—and any servicing of the loan by Lamb Weston will violate those. If it doesn’t pay off the loan, on the other hand, its business in Russia may be doomed. One VTB Bank expert who asked that their name be withheld for fear of retaliation by their employer suggested there may be an attempt to transfer the loan to a different Russian bank, but the terms would likely be bad for all parties. (FP reached out to Lamb Weston for comment on the problem but got no reply.)

It’s just one of many problems facing foreign businesses in Russia, along with the public relations disaster of being associated with Moscow—and the seizure of assets, like airplanes, by Russian authorities for those that comply with Western demands. Many have chosen to pull out. But others are trying to weather the storm—either quietly, like Red Bull and Match Group, which owns Tinder, or by offering excuses. (Neither Red Bull nor March Group responded to requests for comment. Red Bull has stated it is halting marketing activities in the country and that is fully compliant with sanctions.)

In the summer of 2021, Lamb Weston, an Idaho-based food processing giant, signed a deal with Russia’s VTB Bank for an 11 billion ruble (or around $150 million) loan to build a second food processing plant in Russia. The agreement was sealed at the St. Petersburg International Economic Forum, where the Dutch CEO of Lamb Weston/Meijer, the European arm of the company, flew in for it.

At the time, there was no problem with this deal. But now, VTB Bank is under U.S. sanctions—and any servicing of the loan by Lamb Weston will violate those. If it doesn’t pay off the loan, on the other hand, its business in Russia may be doomed. One VTB Bank expert who asked that their name be withheld for fear of retaliation by their employer suggested there may be an attempt to transfer the loan to a different Russian bank, but the terms would likely be bad for all parties. (FP reached out to Lamb Weston for comment on the problem but got no reply.)

It’s just one of many problems facing foreign businesses in Russia, along with the public relations disaster of being associated with Moscow—and the seizure of assets, like airplanes, by Russian authorities for those that comply with Western demands. Many have chosen to pull out. But others are trying to weather the storm—either quietly, like Red Bull and Match Group, which owns Tinder, or by offering excuses. (Neither Red Bull nor March Group responded to requests for comment. Red Bull has stated it is halting marketing activities in the country and that is fully compliant with sanctions.)

Koch Industries, for example, originally justified itself by saying it didn’t want to “hand over [its] manufacturing facilities to the Russian government so it can operate and benefit from them.”  (It has since spoken of leaving.) Lamb Weston mentioned its concern for the “personal situation” of its workers and their families in Russia and has ceased expansion and new investment in the country.

The companies that have already left have tended—with good reason—to emphasize the moral risks. McDonalds, for instance, stated, “[O]ur values mean we cannot ignore the needless human suffering unfolding in Ukraine.” And that hasn’t meant abandoning Russian staff; many firms have been providing salary continuations or directly evacuating personnel.

The businesses that are staying might think—or at least tell Western governments—that they can remain separate from Russia’s increasingly unhinged political system. But if they really think that, they’re way off base. Business in Russia is integrating fully into a newly totalitarian system.

Control of the economy has always been a cornerstone of Putinism, but it came slowly in fits and starts. First, the oligarchs were targeted and brought to heel, and the public didn’t mind because the oligarchs were robber barons and hated villains. Yet the situation kept growing more complex. More and more people began ending up in jail for financial crimes as ruthless raids, often led by greedy officials, took over their businesses—as detailed in journalist Peter Pomerantsev’s chilling and brilliant book Nothing Is True and Everything Is Possible: The Surreal Heart of the New Russia.

By the time 2014 rolled around and Russian President Vladimir Putin seized Crimea, the reins began to be tightened in a more systemic manner, as driven by sanctions and growing Kremlin paranoia. Today, Russian officials speak openly of autarky and total state control of any company, foreign or domestic, that rebels against them. This is not realistic in the long term, but for now, the flailing Russian regime will attempt it anyway.

Putin seduced ordinary Russians by promising stability after the chaotic 1990s, and he delivered it. It’s just that his definition of stable is when everything is controlled by him, his friends, and their children. He “conquered” the oligarchs, sure, but for his own benefit.

Putin’s government threw some crumbs to the populace in the course of this conquest—but not out of civic duty. It was done to solidify Putin’s grip on power. Inequality in Russia only grew in the meantime, as an entire generation grew up in the shadow of Putinism—the same generation now being sent to kill and die in Ukraine. And why not? Putin and his circle have only ever viewed their fellow Russian citizens through the prism of disdainful feudalism.

As Russia suffers a continuous fallout from its decision to attack Ukraine, Russian officials will get more involved in business, not less. The corruption trough, the easy bribes and kickbacks, will not be nearly as plentiful, but a rapacious bureaucratic elite is accustomed to a certain lifestyle now—and they will bleed local businesses dry to maintain it.

The threat to nationalize companies departing the Russian market is only the beginning. Days before the invasion, a Russian Duma deputy made clear that confiscating ordinary people’s savings was potentially on the table should a financial crisis erupt. In a post-invasion world, this financial crisis is, of course, inevitable.

Today, for a Western business, staying in Russia doesn’t just mean supporting Putin’s war through tax money, though that is an obvious and important issue. It means full cooperation with authorities who insist that wiping out the country next door is a good and noble cause. It means accepting that your business exists only due to the good graces of Putin’s cronies.

This is the only way that business can be done in Russia because the Putinist nobility can’t have it any other way. It is not a free economy. It’s very clear that foreign companies can’t trust the Kremlin. A government in full fascist meltdown cannot be a good or even halfway decent partner. Executives trying to stick to existing deals or pandering to the hate around the invasion are giving a scorpion a ride and should not be shocked when it stings them.

A different case can be made for providers of essential products. Russian babies shouldn’t be denied their formula because their president is a murderous sociopath. But if you’re in the business of potato fries or glassware, energy drinks or dating apps, you can and should leave. Let the Kremlin develop its own dating app. Let Putin make his own energy drink—he can even pose shirtless on the can. Pale imitations of foreign goods are the least that his supporters deserve.

Christian Borys contributed research to this piece.

Natalia Antonova is a writer, journalist, and online safety expert based in Washington.

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