The list of companies continuing to operate in Russia is shrinking by the minute, but dozens of corporations including multinational manufacturers and hotel chains are still doing business in the country despite intense public pressure to withdraw over its invasion of Ukraine.
McDonald’s was among the big-name companies to announce on March 8 that it would temporarily close its 850 restaurants in Russia. Cola-Cola and PepsiCo quickly followed suit, as did restaurant chain Papa John’s and others the next day.
Caterpillar cited “supply chain disruptions and sanctions” for its March 9 decision to suspend operations at its Russian manufacturing facilities. “We recognize this is a time of incredible uncertainty for our valued employees, and we will continue to look for ways to support them,” the equipment maker stated.
The Peoria, Illinois-based company opened its first office in Russia in 1973, and has a parts distribution facility in Moscow and a manufacturing plant in Tosno, near Saint Petersburg. Russia accounts for 8% of Caterpillar’s annual revenue, or approximately $4 billion, according to Yale University management professor Jeffrey Sonnenfeld.
More than 30 large companies “remain in Russia with significant exposure,” according to a running tally updated daily by Sonnenfeld and his team.
The goal of calling out the companies is to pressure them to work in concert with the U.S. government and its allies that have imposed economic sanctions against Russia, Sonnenfeld told CBS News. Government sanctions “rarely succeed completely alone, they need fairly universal support of the business community to truly paralyze an economy as intended,” he said. The combination of economic sanctions and a massive corporate pullout from South Africa, led by General Motors, helped spark the dissolution of that nation’s apartheid system of institutionalized racial segregation, he noted.
Sonnenfeld said he’s been hearing from CEOs frustrated with boards “caught in a 1990s mind warp, where we thought, ‘Well, we’re going to have to find a middle ground here.'”
“There’s no middle ground here,” the professor said.
Companies voicing “humanitarian concerns for the general Russian citizenry” are missing the point of the sanctions, which only succeed when the “tyrant is no longer a successful totalitarian,” he added.
Large businesses choosing to maintain their presence in Russia include Japanese apparel chain Uniqlo. The CEO of its retail holding company owner, Fast Retailing, vowed to keep the brand’s 50 retail stores across Russia open, calling “clothing a necessity of life,” according to a March 8 report by Nikkei Asia.
The list also includes Illinois-based Abbott Labs. Among companies condemning the war, Abbott on March 4 said it would donate $2 million to humanitarian groups offering relief in Ukraine. The multinational medical devices and health care company did not mention Russia or its operations in the country in its statement.
Also on Sonnenfeld’s list is Tokyo-based tire and rubber-products producer Bridgestone Tire. It runs manufacturing plants in Russia, but the extent of its business in the country is unclear.
U.S. agricultural trading giant Cargill derives $1.1 of revenue from Russia, where it employs 2,500. “The events unfolding in Ukraine are heartbreaking,” it tweeted on February 27. “It’s hard to comprehend the challenges our employees, customers and their families in the region face in the days and weeks ahead. Our first priority is their safety and for that reason we have closed some locations.”
Citigroup is continuing a previously announced exit of its consumer banking business in Russia, the New York-based banking giant stated on March 9. “As we work toward that exit, we are operating that business on a more limited basis given current circumstances and obligations.”
That includes helping corporate clients in Russia, including many U.S. and European multinationals, as they suspend or unwind their businesses, it said. “With the Russian economy in the process of being disconnected from the global financial system as a consequence of the invasion, we continue to assess our operations in the country.”
Citi holds $9.8 billion in domestic and cross-border exposure to Russia, according to a regulatory filing on February 28.
Multilevel marketing company Herbalife Nutrition obtains 2.7% of its revenue from Russia and Ukraine.
Hotel chain Hyatt on March 9 said it was suspending development activities and new investments in Russia and will “continue to evaluate hotel operations in Russia.” Hyatt in a March 4 statement said it was “heartbroken over the devastation” in Ukraine and had started a relief fund for colleagues in the region in need of necessities and relocation help. The company operates six locations in Russia, according to Sonnenfeld.
Offering similar words, Marriott on March 8 updated its statement expressing concern over the humanitarian crisis in Ukraine and neighboring countries, saying it’s working with charitable organizations to help. The international chain has at least 10 locations in Russia.
The list of outliers is being shared on social media, prompting calls to boycott Hyatt and others on it.
“The Russian invasion of Ukraine has highlighted the intersection of risk, reputation and revenue,” Paul Washington, executive director of the ESG Center at The Conference Board, said in a report. “For many companies, the decision to suspend ties may be a relatively easy one. Given the size of the Russian economy, little revenue may be involved. And the reputational harm of continuing business — and the benefit of announcing a withdrawal — may be significant.”
Crypto’s unified front?
Some cryptocurrency companies are also resisting pressure to close Russian accounts, despite a February 27 appeal from Ukraine’s vice prime minister “asking all major crypto exchanges to block addresses of Russian users.”
Kraken CEO Jesse Power replied, saying that “despite his deep respect for the Ukrainian people,” his company could not freeze the accounts of Russian clients unless it was legally required to do so.
The world’s biggest cryptocurrency exchange, Binance, is blocking the accounts of Russians on western economic sanction lists, but not Russians at large. “We are not going to unilaterally freeze millions of innocent users’ accounts,” CEO Changpeng Zhao wrote in a March 4 blog post.
Coinbase CEO Brain Armstrong on March 4 tweeted that “ordinary Russians are using crypto as a lifeline.” Still, the company would comply with any bans imposed by the U.S. government, he added.
Coinbase’s stance aligns with those taken by other crypto exchanges including Kraken, KuCoin and Coinberry.