Foreign Companies Facing No Prospects of Reentry in Russia, According to Analysts
In recent developments, the Russian government has unveiled a concept to facilitate the return of foreign businesses that have departed from the country. This move comes amidst ongoing discussions between Russia and the US, with President Vladimir Putin emphasizing that the return of foreign business should be accompanied by "mandatory guarantees of honest and responsible conduct in our country," prioritizing Russian producers [1].
The study, which analysed over 1,600 companies, including 1.5 thousand that had partially or fully left Russia, categorised the departed businesses into three groups: red, yellow, and green. Companies on the red list, such as Amazon and PayPal, displayed unfriendly actions, while those on the yellow list, including H&M, Dell, Ubisoft, and IKEA, did not demonstrate "sufficient responsibility" [2]. The "green" companies, like Airbnb, Nestle, McDonald's, Michelin, and Apple, left with a "responsible approach" and may potentially return to the market "in case of industry demand" [2].
The maroon status was given to companies with "damaged reputations" (4.3% of the total sample), such as Cisco and Pfizer [2]. Notably, Pfizer confirmed that it continued its activities in Russia and continued to supply medicines to Russian patients.
The return of foreign businesses to Russia will be subject to these "mandatory guarantees of honest and responsible conduct," as emphasized by President Putin. However, it is important to note that the concept does not specify any restrictions for companies that left Russia in a controversial manner [1].
The return of foreign companies will be considered based on market conditions. One scenario involves "greenfield investments," where companies start a project from scratch, which can be utilised by all interested companies [1]. The second scenario involves submitting an application to a subcommittee of the government commission on foreign investments, which will decide on the return of assets to foreign companies that have left [2].
However, the return of a foreign company would not be guaranteed for all companies that left, as it will depend on the specific circumstances and whether their return contributes to the interests of Russia. If the return of a foreign company would hinder or not contribute to the further consolidation of Russian producers, it would contradict the interests of Russia, according to First Deputy Prime Minister Denis Manturov [2].
This controlled, restrictive framework aims to allow foreign companies back selectively, ensuring that their return aligns with Russian national interests and political goals, with the ability to block companies perceived as unfavorable [1]. Factors influencing the potential return of foreign companies include the country of origin, new legislation, domestic lobbying and business interests, and the economic and geopolitical context [1][3].
Restrictions on investment from Western countries classified as "unfriendly," such as most EU members, the US, UK, Canada, Japan, South Korea, Australia, and New Zealand, could be eased but remain significant in the decision process [1]. Draft laws under consideration would grant Putin expanded powers to block foreign companies from buying back assets they sold when exiting Russia, especially targeting strategic sectors like food producers, retailers, and restaurants [3].
This political pressure shapes the re-entry framework, particularly in sectors like fast food [3]. The ongoing Western sanctions against Russia due to the Ukraine conflict and broader geopolitical tensions create an uncertain environment for foreign firms considering their return [1][4].
In conclusion, Russia is carefully navigating the return of foreign companies, ensuring that their return aligns with Russian national interests and political goals, while also considering the interests of domestic Russian companies. This approach allows for a pragmatic, case-by-case evaluation of returning companies, allowing those whose return benefits Russia and blocking others by finding reasons not to permit re-entry.
- The study categorized some companies that have left Russia, such as Airbnb and Nestle, into the "green" group, signifying they left with a responsible approach and could potentially return to the market if industry demand arises.
- The return of foreign businesses to Russia, like Airbnb and Nestle, will be contingent upon these companies providing "mandatory guarantees of honest and responsible conduct," a requirement emphasized by President Putin.
