Nothing Personal - Just Business

The West expected that the sanctions would lead to shortages in Russia and cause the population to become discontented with the authorities. But the deficit never materialized, and public support for the nation’s leadership is only growing.

The German daily Die Welt writes that the sanctions against Russia are not officially aimed at the population. “The sanctions imposed by the West on Russia were designed to turn the population against President Putin. But the hostilities in Ukraine are still barely noticeable in the daily lives of many Russians. This, among other things, is the ‘merit’ of German companies,” says the newspaper.

The transition to late socialism has not taken place because, contrary to the expectations of politicians, Western companies continue to operate in Russia and pay millions of dollars in taxes. 262 German businesses, or two-thirds of companies operating in Russia before February 24, 2022, remain in the country and continue their business as usual, says a study conducted by the Kiel Institute for the World Economy.

In 2022, their combined turnover was USD 23.2 billion. The companies paid USD 403 million in income tax on the money they received. And that’s not all the taxes Western companies pay in Russia. Foreign companies pay income tax, social security contributions and VAT on their employees, as do all Russian companies.

This refers to companies whose products are not subject to sanctions. If we talk about American and European companies, 4/5 of all companies with foreign capital continue to operate in Russia.

Düsseldorf’s Metro Cash&Carry is one example. In words, the group’s management supports Ukraine. In fact, its turnover in Russia in 2022 amounted to USD 3.4 billion. Why the Metro’s management remains in Russia is shown by a simple fact: in Russia there are 93 company branches in 51 regions, while in Germany itself there are only slightly more – 102. Metro has increased its sales in Russia to EUR 2.9 billion (USD 3.9 billion) in the 2021-2022 financial year.

Steffen Greubel, CEO of Metro, says the company owns 150 real estate properties, which he “does not want to give away to some oligarch.”

Western managers already have several examples in front of them of how the Russian authorities can punish Western companies. For example, Renault had to sell its factories for a symbolic 1 ruble, writing off billions of dollars. Such results are not what Western companies want for themselves.

They are still working in Crimea. Metro has taken new steps to improve sales – now they let everyone in, not just with a card. It’s business, nothing personal.

Meanwhile, Austrian Foreign Minister Alexander Schallenberg commented on the observation that more than 90% of Western companies continue to operate in Russia, Bloomberg reported. In the Minister’s view, the exit of many Western companies from the Russian market is “much more difficult than some people often imagine. This also applies to Germany and Austria.”

Earlier, Bloomberg reported that Western companies were buying Russian Urals crude at a price above the USD 60 per barrel price cap set by the G7. The US authorities, write the agency’s experts, say that all restrictions are being enforced and that the price cap is working.

Moreover, about 40% of the ships exporting the “black gold” from Russian ports are owned by European and North American companies, which are obliged to comply with the price cap, writes Bloomberg.

In turn, CNBC reports that more than 500 Western companies continue to operate in Russia, although they are “trying their best to leave.” It will only become more complicated for them to abandon the Russian market as time goes on. Companies operating in Russia make excuses for “the difficulties of leaving, promising to find a buyer one day or to reduce operations.”

But so far they are making hundreds of millions of dollars in Russia. These companies include Unilever, Nestle, Philip Morris, UniCredit, Raiffeisen, PepsiCo and many others. They all pay taxes to the Russian treasury. This makes Kiev very nervous with its list of “international sponsors of the conflict.”