More and more Western companies are announcing that they want to leave Russia, a decision that is then “difficult to reverse”, especially for those who have “very heavy investments” there, warns economist Christophe Destais.
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If the reasons are multiple, “economic, political or ethical”, some of these companies are “calculating” that there will be “no possible return” without a radical change in the political situation in this country, continues Mr. Destais, Deputy Director of the Center for Prospective Studies and Information (CEPII).
Q: What aspect predominates in these disengagement announcements in Russia? The financier? Logistic? Politics? Ethics?
A: “The logic is certainly not only economic, especially for very large international companies which have a “reputational capital” to manage. The idea of remaining in a country which is seen as the aggressor can have serious consequences”.
“One can imagine that certain governments have encouraged companies to take this step… But, with the turn of events, companies can also estimate (on their own) that the degree of uncertainty for their activities is too high – the price to be paid may turn out to be prohibitive”.
From an economic point of view, “it depends on the sectors. In consumer goods, investments by international companies in a country where they only distribute – that is, where they do not produce – are relatively minimal. They give up their markets, but if they hadn’t, economic conditions or the market itself might have given them up. The issue is much more complex for capital-intensive companies, including those in the energy sector, intermediate goods and, in the case of France, automotive companies and large banks that had invested. (…) And everything depends on the calculation made both on the duration of the crisis, its outcome and the possibility of returning to Russia afterwards”.
Q: For companies that say they want to leave the country, is this a necessarily long-term decision?
A: “When it comes to companies with very heavy investments, we are talking about years – companies in the energy sector arrived in Russia just after the fall of the Wall (of Berlin, in 1989) and were not players significant until at least a decade later. A number of those in charge of these companies are calculating that there is no possible return without a political situation which would change radically in Russia. We are talking about a process that is difficult to reverse”.
“For those who stay, regardless of image and ethical considerations, I think they say to themselves ‘I will try to maintain the link so that I can try to reactivate them when the time comes'”.
Q: This is the case for companies that announced a simple suspension?
A: “The freezing of activities can have a very different meaning depending on the company. When it comes to restaurant closures, it’s not the same as exploration or production in Siberia’s far north. More broadly, I think that Western companies today no longer have the technical capacity to operate in Russia, so they have no choice but to freeze their operations at the very least. There are considerable obstacles, particularly financial ones”.
On the fate of local assets for departing companies, “it all depends on the legal framework under which they operated in Russia. In the case of British Petroleum (BP), for example, it is a stake in a very large Russian oil company (Rosfnet, editor’s note). Technically, this stake is for sale and BP is making provisions to be able to sell it, with considerable accounting losses”.
“More often than not these businesses have local legal realities (…) and then you either find a buyer who is not of the same mindset as you or you close. In the latter case, as from Paris, London or New York, we have no control over what happens, de facto the assets will be appropriated by the Russians – (Vladimir) Putin spoke of a nationalization of these companies “.
Reference-www.tvanouvelles.ca