Trump's win vindicates US firms that never left Russia

In 2022, hundreds of Western firms left, but around 200 American corporates stayed, including big names like Pepsi and Mars, in part because the cost of leaving is high—and getting higher

Sara Padovan

Trump's win vindicates US firms that never left Russia

Nazareth Seferian

last update on 07 Nov 2024

In September, when asked about sanctions against countries like Russia, Donald Trump said he used them “but would put them on and take them off as quickly as possible,” adding: “I want to use sanctions as little as possible.”

Sanctions have displaced many companies from Russia, but not all. According to the Chief Executive Leadership Institute at Yale School of Management, more than 200 American companies still operate in the country and have no plans to leave. A well-known admirer of Russian President Vladimir Putin, Trump has bragged that—if elected—he would end the war in Ukraine before he takes office in January. The hold-outs may be biding their time. If Trump wins, sanctions could be removed, and corporate life could return to normal.

Cost of leaving

In October, boardrooms heard Russian Finance Minister Anton Siluanov talk about an increased “exit tax” that companies must pay to leave. “The discount for foreigners will increase from 50% to 60%,” he said, adding that up to 35% of each exit deal would be transferred to the state budget as a single payment.

This is just the latest complication for firms looking for the door. Some have been trying to leave since Russia invaded Ukraine back in February 2022. They “had difficulties getting out,” says Jeffrey Sonnenfeld from Yale School of Management. “There were some legal complications. There are franchise arrangements and things like that. It made it hard for them to figure a way out.”

The risk of exiting Russia is much higher than staying

Dirk van de Put, Mondelez CEO

Daniel Tannebaum from Oliver Wyman Financial Services says Western firms looking to exit will struggle to recoup costs. "No one is really making money on exiting Russia because it's essentially a fire sale. Some are trying to manage the cheapest exit, really the least loss to their shareholders as possible."

Some US firms seem undeterred by the increased costs of going. Citigroup announced its final Russian branch closure on 15 November 2024, marking the end of its retail banking services in the country. "We urge our customers to find other options for their resources and end their transactions by the closing date," it said.

Once one of the top 20 Russian banks by assets, it had reportedly been mulling a Russian withdrawal since 2021, before the invasion of Ukraine. Its exit leaves the bank with a $9.1bn exposure. More than 80% of this consists of corporate dividends that cannot be transferred out of Russia.

JPMorgan Chase, another big name in the banking sector, was caught up in a lengthy legal battle with Russia's VTB Bank and eventually gave up on its claim to $439.5mn of assets frozen in the country. So, stay or leave, big corporations seem to be funding Russia's continued aggression in Ukraine regardless.

In August 2024, Ukrainian media reported that ten large international corporations had paid the Russian state £1.78bn in tax on profits last year, including $491mn from Raiffeisen Bank, $135mn from PepsiCo, and $99mn from Mars. Raiffeisen chose to reduce its Russian operations, meaning its year-on-year net profit would fall by 16%.

AFP — A bottle of Coca-Cola is pictured in front of St. Basil's Cathedral in central Moscow on March 9, 2022.

According to the Kyiv School of Economics, the Russian operations of Mars made the company $295mn more in 2023 than in 2022 (which, in turn, beat 2021 earnings by 20%). It continues to hire staff, with hundreds of vacancies on its Russian website.

Reasons for staying

Some push back against the idea that their non-exit from Russia impacts the war in Ukraine. This includes the chief executive of American confectionary giant Mondelez, who defended the decision to stay in Russia in an interview with Bloomberg earlier this year. "If stopping our operations in Russia would stop the war, we would definitely do so," said Dirk van de Put, speaking in February.

"We believe that the vast majority of our investors understand what we're trying to do. The risk of exiting Russia and what would happen to our business, and how it would be used, is much higher than staying, continuing to operate locally, scaling back our operations, making our business more stand-alone."

Van de Put added that the company's Russian business only contributed around 2.8% of its global revenue and that no big investors had urged Mondelez, which makes Oreo biscuits, to pull out of the country.

The initial shock of the Russian invasion in 2022 has worn off, and companies now feel they would be replaced if they left, making any future re-entry into Russia more difficult

Maria Shagina, IISS senior fellow

Maria Shagina, senior fellow at the International Institute for Strategic Studies, says the initial shock of the Russian invasion in 2022 has worn off, and companies now feel they would be replaced if they left, making any future re-entry into Russia more difficult. However, there is a PR backlash to staying. When Chechen leader Ramzan Kadyrov distributed packets of Mars chocolates to Russian schoolchildren, the video went viral. Kyiv now labels Mars a "sponsor of war".

PepsiCo initially said it would stop the production and sales of its drinks in Russia, following the invasion in February 2022, but its popular chips (like Lays and Doritos) are still sold throughout the country. The company was even featured in a Russian news agency report from TASS earlier this year, saying PepsiCo had opened a new factory in Novosibirsk. The factory is believed to be operating at around 20% capacity, awaiting equipment that cannot enter the country due to sanctions.

Shadow of elections

Trump's campaign pitch has been that he could end the war in Ukraine in a heartbeat if elected and that lifting US sanctions on Russia could be part of any package. Kamala Harris, the Democrats' presidential candidate, told Trump that Putin "was a dictator who would eat you for lunch".

Microsoft Threat Analysis Centre reported that Russian cyber activists were targeting Harris and her running mate Tim Walz with fake news stories and misinformation to damage their campaign, given the fact that she would have likely maintained sanctions if she had won.

For their part, Trump's win certainly vindicates Western companies still in Russia for their decision to stay.

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