The Economist - UK (2022-03-19)

58 Business TheEconomistMarch19th 2022

The last lot are the remainers.

Nearly  400  Western  firms  have  an­

nounced  plans  to  suspend  or  scale  back

their  operations  in  Russia  since  Mr  Putin

attacked  Ukraine,  according  to  a  tally  by

Jeffrey  Sonnenfeld  of  the  Yale  School  of

Management. Some of them, such as bp, a

British  energy  giant  and  Russia’s  biggest

foreign investor, pulled out early and with

seemingly  little  hesitation.  Others  did  so

more  reluctantly.  Citigroup,  an  American

bank with nearly $10bn of exposure to Rus­

sia, had previously said that it was assess­

ing its operations in the country, including

its consumer business. But on March 14th

the  bank,  which  has  been  in  the  country

since  1992,  said  it  would  “expand  the

scope”  of  its  withdrawal  and  stop  seeking

new business or clients.

Russians living in big cities, where the

bulk of Western firms’ retail operations are

located, will suffer the most from such clo­

sures. But the pain will be felt throughout

Russia’s vast landmass. An analysis by The

Economistof data provided by SafeGraph, a

geolocation­information  firm,  shows  that

the  shutdown  of  Western  businesses  will

affect at least 3,500 retail outlets in 480 cit­

ies across the country. This includes 1,200

restaurants and cafés, 700 clothing stores,

500  shoe  shops  and  400  petrol  stations.

Muscovites  will  suffer  around  1,000  shop

closures;  residents  of  St  Petersburg  will

face more than 300 (see map). 

Critics  of  Western  firms’  voluntary

withdrawals say that these could radicalise

the  middle  class  and  anger  traditionally

pro­Western  young  Russians.  That  could

solidify Mr Putin’s regime rather than top­

ple  it,  they  argue.  Mr  Harms,  who  used  to

live  in  Moscow,  disagrees.  The  middle

class understands that the exodus is aimed

at the regime rather than the population at

large, he thinks. 

Moreover,  Western­style  consumer

goods will remain available in Russia. Safe­

Graph’s data show that Russians shopping

for Nike trainers won’t have far to go to find

an  alternative  pair  at  one  of  Reebok’s

stores, which are operating as normal. The

median distance between the rival Ameri­

can sportswear brands’ outlets is 0.8km. If

Big  Mac  lovers  are  prepared  to  accept  the

Whopper as a substitute, they can typically

find an open Burger King within 0.6km of a

closed  McDonald’s.  Burger  King’s  owner,

Restaurant  Brands  International,  has  sus­

pended support for its Russian franchisees

but many of their outlets remain open. The

same goes for some other Western brands.

The big question is what will happen to

the firms that have pulled back from Rus­

sia.  Russian  prosecutors  have  reportedly

been threatening to arrest corporate execu­

tives who criticise the government and to

seize  the  assets  of  companies  that  with­

draw from the country. A senior member of

Mr  Putin’s  United  Russia  party  mooted  a

plan  to  nationalise  the  operations  of  de­

parting  Western  companies,  arguing  it

would  help  prevent  job  losses  and  main­

tain Russia’s domestic productive capacity.

Mr Putin has endorsed the plan.

Some  companies  that  are  staying  put

are,  by  contrast,  apparently  being  courted

by  Russian  officials.  They  must  weigh

those inducements against accusations of

war­profiteering,  which  have  sprouted  all

over Western social media. Olga Podorozh­

na,  a  Metro  employee  in  Ukraine,  fiercely

criticised  her  employer’s  decision  to  stay

in Russia in an emotional post on Linked­

In, a social network. Metro reacted with its

own  LinkedIn  post  condemning  the  war.

But it has not reversed its decision to keep

its Russian shops open. 

That  is  unsurprising.  Around  10%  of

Metro’s  total  sales  of  €25bn  ($28bn)  are

generated  by  its  93  supermarkets  and

10,000  or  so  employees  in  Russia.  The  19

Globus  hypermarkets  with  9,900  Russian

employees  accounted  for  14%  of  the

group’s sales last year. They were doing so

well  that  the  company  has  invested  more

than  €110m  in  the  Russian  market  in  the

past  couple  of  years.  For  firms  like  these,

virtue­signallingismuchharderthanitis

foracompanysuchasCoca­Cola,which

derivedlessthan2%oflastyear’srevenue

fromRussia.Butthepressuretoheadfor

theexitmountswitheveryindiscriminate

Russian assault on Ukraine and its be­

siegedcitizens.Evenfortheremainers,the

reputationalcostofstayingmaysoonbe­

cometoohightoignore.n

RUSSIA

CHINA

MONGOLIA

Vladivostock 26

Norilsk 1

St.Petersburg

~35

KAZAKHSTAN

Moscow~1,1

15 km

Cars Fashion Groceries

Petrolstations Restaurants Other

Moscow,storeclosures*,March14th222

Closures of Western stores†

Sources: SafeGraph;

The Economist

*Selected Western outlets for

which data are available †All categories

Chinesebigtech

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T

hechinesecommunistpartyhasex­

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Share-cropping

Stockmarket indices, January 1st 2022=100

Source:RefinitivDatastream

110

100

90

80

70

60

January February March

HangSengTechnology

NASDAQComposite

MSCI Golden Dragon