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In the 1930s, US General Smedley Butler identified the vicious nature of war when he wrote that profits are measured in dollars and losses in lives.
For western companies in Russia the costs are measured in currency. Société Générale, Imperial Tobacco and Domino’s Pizza, whose franchisee DP Eurasia recently filed for bankruptcy in Russia, all took large losses, when they left the country. SocGen alone recorded a €3.1bn loss. Danone and Carlsberg had no choice. The Kremlin seized their assets.
So far, these companies are the minority. Many western companies with businesses in Russia remain, despite pressure from shareholders and customers to leave.
About 1,000 companies registered in the US, Europe and other Ukraine-allied countries accounted for revenues of about $172bn in Russia last year, according to the Kyiv School of Economics. Approximately half have announced that they plan to stay in the country or have yet to decide.
Top sectors include food and beverage, consumer goods and pharmaceuticals, produced by Pepsi, Mars and Mondelez. Unilever deems its products essential for Russian civilians and plans to stay so that it can better look after its local workforce. Otherwise, says Unilever, its Russian factories will continue to operate under new Kremlin-approved ownership.
However, almost all large, western companies still in Russia have cut new investments and limited exports of goods to the country.
Calculating losses is difficult. Many companies with Russian operations do not take any earnings out of the country. Unilever says it does this voluntarily. Many cannot, given Russian laws designed to keep money in the country. Others risk breaching sanctions. One lawyer suggests those that want to get money out can use the global offshore banking network.
Ultimately, if the cost of staying is negligible, the withdrawal of western business from Russia will continue as a slow retreat.