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Opinion | Ukraine war: Western firms’ continued Russia presence offers reality check on divestment
- Russia’s invasion of Ukraine is a test case of businesses’ willingness to unwind cross-border ties that have been deepening since the fall of the Berlin Wall
- While many Western corporations with business in Russia have announced plans to exit the country, very few have actually followed through
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The fallout from Russia’s invasion of Ukraine is still reverberating in corporate boardrooms around the world. Since continuing peace and geopolitical stability can no longer be assumed, two implicit pillars of many businesses’ international strategies have begun to fracture.
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Western governments – which are swayed more by national security officials now than in the recent past – are demanding that domestic firms decouple from autocratic regimes.
Russia’s appalling, unprovoked war is a test case of businesses’ willingness to unwind the cross-border ties that have been deepening since the fall of the Berlin Wall. European Union and Group of 7 countries were among the first to impose sanctions on Russia, and Western companies with subsidiaries in Russia have been under significant pressure to divest. But what matters is how much they have actually pulled up stakes.
In recently published research, we set out to answer the following empirical questions: in the nine months after the invasion, to what extent did Western businesses actually divest from their Russian subsidiaries? What was the commercial footprint of exiting firms compared to those that stayed? And were companies headquartered in certain Western countries more likely to leave than others?
We didn’t know what to expect. On one hand, the narrative of a mass exodus from Russia led us to think that we would find widespread Western divestment. On the other hand, precedents like the campaign to persuade Western firms to leave apartheid-era South Africa tempered our expectations.
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To establish a clear definition of foreign companies operating in Russia around the time of the invasion, we used the highly regarded ORBIS database to identify those subsidiaries in Russia owned by firms registered in countries leading the sanctions campaign.
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