Western companies and banks operating in Russia balance international pressure on sales from Moscow and potential retaliation, whether they intend to leave the country or continue to do business in Russia. I am facing great difficulty as I try to do so.
Since the invasion of Ukraine, more than 400 Western companies have left Russia, leaving billions of dollars in wealth. Despite suspending new investment, about 80 companies are still in operation. Most of these companies are pharmaceutical and consumer companies that claim that their withdrawal from Russia will unnecessarily harm the Russian people.
Some are worried that employees may face legal retaliation from the Kremlin.
Bruce Haynes, Global Co-Chair of Crisis Communications, a public relations firm SVC + FGH, said: Reuters..
SVC + FGH has advised companies on the withdrawal of Russia.
Companies such as Procter & Gamble Co., PepsiCo Inc. and Nestle have announced that they will continue to operate in Russia, primarily focusing on essential nutrients and personal hygiene products such as milk and diapers.
Pharmaceutical companies Bayer AG and Pfizer will stop unnecessary businesses, but will continue to supply medicines for diseases such as cancer and diabetes.
The Kremlin threatened departing foreign companies that the government could seize their property. Prosecutors have warned companies that employees could be arrested if they stop producing essentials.
On the other hand, Western banks are having a hard time clearing their assets. The Moscow Stock Exchange has been closed since February 25th. Large asset managers rely on banks to minimize losses after reopening transactions in Russia. However, this may require securing the required permits, and it is doubtful if they will find a buyer.
In the United States, selling assets to licensed entities requires a special license from the Office of Foreign Assets Control, US Treasury. The time required to obtain such a license is not clear.
In the European Union, payment systems are blocked from trading bonds, stocks and derivatives in the ruble, which is the only currency currently payable by Russian companies.
Banks have only a few weeks to enter into unpaid contracts with Russian customers subject to Western sanctions. Banks also need to ensure that transactions with the remaining Russian customers do not violate those sanctions.
Banks are likely to deal with the increased risk of Russia-related legal and regulatory issues for decades, said Pushan Dat, a professor of economics at INSEAD. Reuters.. “Without the change of power, Russia will remain separated from the international banking system.”
Italian banking group UniCredit could amortize € 7.4 billion ($ 8.19 billion) on withdrawal from Russia, French investment bank Societe Generale warns that Russia could confiscate Russian assets doing. Reuters report.