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Companies from Apple to ExxonMobil are exiting or reducing their investments in Russia, adding to the country’s economic pain following its invasion of Ukraine.
Russia is caving in under a series of harsh and far-reaching sanctions imposed by the United States and its allies. They restricted the country’s access to its foreign currency reserves and barred many of its banks from access to SWIFT, a global network used by financial firms to transact.
As a result, the value of the ruble fell, Russia was forced to raise interest rates sharply, and the country kept its stock market closed to avoid further economic and financial difficulties.
The impact of the sanctions has made it virtually impossible for companies to do business in what is the world’s 12th largest economy and also a major exporter of energy supplies.
On top of that, many companies worry about the impact on their corporate image globally if they continue to do business in Russia.
“Never before have we seen such a large economy subject to such global actions, and at the current pace, we see Russia well on its way to being talked about in the same breath as Cuba and Iran,” said Daniel Tannebaum, the global head of sanctions at consultancy Oliver Wyman.
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Oil companies are among those cutting ties
Energy giant BP helped kick off the corporate exodus on Sunday, when it announced plans to unwind a 20% stake in Russian oil giant Rosneft.
“This military action represents a fundamental shift,” BP Chairman Helge Lund said in a statement.
In the days that followed, two of BP’s competitors, Shell and ExxonMobil, followed suit.
Exxon’s exit was particularly noteworthy given that the oil company has long had close ties with Russia, even though its footprint in the country has shrunk in recent years.
“ExxonMobil stands with the people of Ukraine as they seek to defend their freedom and determine their own future as a nation,” the company said in a statement. “We deplore Russia’s military action that violates Ukraine’s territorial integrity and endangers its people.”
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It’s not just the oil companies
But the exodus was not limited to the energy sector.
Volvo Cars and GM halted vehicle exports to Russia, while Harley-Davidson said it had “suspended operations in Russia and all shipments of its bikes to the country”.
Tech companies are also reducing their operations in the country.
Dell has suspended product sales and Apple has also “suspended all product sales in Russia,” according to a company spokesperson, who noted that “Apple Pay and other services have been restricted.”
Several of the world’s largest shipping companies no longer serve customers in Russia, including UPS, FedEx and Maersk.
The Danish shipping company said it “has now suspended bookings to/from Russia and Ukraine until further notice”, with the exception of “foodstuffs, medical and humanitarian supplies”.
More companies should leave
Analysts expect more companies to leave Russia.
“I think you’re going to see more companies vote with their feet,” Tannebaum said.
Big companies might want to preempt additional penalties and further scrutiny, according to Roberto Gonzalez, partner at law firm Paul, Weiss.
“If companies have the option to pull out now, they could take advantage of it just to kind of reduce the business and repetitive risk of having to take action,” he said.
But some companies seem reluctant to move away from a sizable consumer market. Russia went to more than 144 million people.
WeWork is a company that has decided to stay. On Tuesday, CEO Sandeep Mathrani told Bloomberg News he has no plans to close his four Moscow locations, even though they represent only a small fraction of the company’s overall revenue.