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Western companies that have left the Russian market have suffered billions in write-downs and lost revenue, Reuters reported on Thursday, (March 28) citing calculations based on company filings and statements.
The US and its allies have placed unprecedented sanctions on Russia over the past two years in retaliation for Moscow’s military operation against Ukraine. The measures have led to significant problems for Western firms operating in Russia, including with payments and supply chains, while some international companies have also been shamed by Ukraine and its backers into quitting the country.
According to Reuters, exiting Russia has cost foreign companies over US$107 billion, a 30% increase since the news outlet’s previous tally in August 2023. The report indicated that the increase in losses also stems from Moscow introducing tight requirements for companies wishing to divest, ensuring local buyers receive major discounts on businesses. These include a 50% discount on their assets and a mandatory fee to the Russian budget of at least 10% of the price.
Several divestment deals have been made for a nominal fee of as little as 1 ruble, as in the case of French carmaker Renault. The car giant left Russia in May 2022 and reported a write-down of over US$2 billion as a result of the withdrawal from its second-biggest market. Renault ceded its 68% stake to Russia’s biggest carmaker, AvtoVAZ, with an option to buy it back within six years. AvtoVAZ manufacture Lada cars, which are now based on Renault engineering. The factory continues to operate and has increased production in 2024 as Russia’s auto sales market rebounds.
Collective write-downs of this sort of magnitude will eventually impact share prices. Most of the exited businesses are listed in the West and these financial losses will eventually show up in their balance sheets.
Reports however vary on the number of companies that have exited Russia since 2022. The Yale School of Management puts the number at about 1,000 businesses, while KSE’s Leave Russia project claims that only 372 have completed their withdrawal. Meanwhile, hundreds of foreign companies continue to operate in the country, including French retailer Auchan, US snack giant Mondelez International, Nestle, and Unilever.
Many producers of consumer goods and everyday products have refrained from leaving the Russian market, arguing that ordinary citizens rely on their products. Some also admit that leaving would cost them too much.
Moscow has said it will not stop foreign businesses from leaving, but only on its terms. It also considers the withdrawal of Western firms to be a lucrative opportunity for domestic companies, which can expand their portfolios by acquiring the assets of exiting firms and continuing their operations.
