The Russia corporate divestment that never happened
Less than 9% of rich-world companies have sold up and left the country despite Ukraine war
No one’s Russian for the exits
A thought-provoking and disturbing paper has emerged from the formidable duo of Simon Evenett and Niccolò Pisani, respectively of the St Gallen university and the IMD business school in Switzerland. You might remember a great flurry of activity (or at least of announcement) in the weeks after the invasion of Ukraine last year that image-conscious rich-world multinationals were leaving Russia in a May Day Parade-style display of moral righteousness.
If only by observing their willingness to continue trading in other countries with unpleasant regimes, I was sceptical at the time that this was actually being done on principle. Volkswagen and McDonald’s, the latter of particular significance given its symbolic opening in Moscow after the fall of communism, both announced they were pulling out of Russia. But both continue to operate in Xinjiang, the province where China is holding more than a million Uyghurs in camps. Divestment would happen when it was compelled by sanctions, I thought, not by corporate ethics or consumer pressure. Since then, of course, we’ve had the Qatar World Cup: lots of talk about brand reputation being at risk but still a commercial success.
Looks like that scepticism was justified. Evenett and Pisani found that fewer than 9 per cent of EU and G7 companies had divested from Russia, above the average from all countries (4.8 per cent) but still not exactly a stampeding exodus. Among the rich nations, US companies were more likely to have left than others, though still below 18 per cent.
What do we conclude from this? Probably that we should rely on determined governments rather than corporate voluntarism to isolate repellent regimes. It can be done. Western Europe and particularly Germany’s sharp reduction in usage of Russian gas, for example, is a truly impressive feat, Leopards or no Leopards. It’s also worth about 100,000 pious business executives’ statements about social responsibility.