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Extensive data shows that a large number of companies headquartered in the European Union (EU) and G7 countries continue to operate and invest in Russia.
Jean Claude RaemyEditor Economics
In response to the invasion of Ukraine in February 2022, the G7 and EU countries quickly imposed harsh sanctions on Russia. Governments, NGOs and many media built up pressure: companies should leave Russia and no longer do business there.
What is the situation one year after the beginning of the war in this regard? From the point of view of those in favor of sanctions: Sobering. A study by the University of St. Gallen shows that Western companies are only withdrawing from Russia to a very limited extent. Nine out of ten of the companies surveyed continue to do business with Russia.
Hardly any retreats despite sanctions
When Russia invaded Ukraine, a total of 2405 subsidiaries of 1404 EU and G7 companies were active in Russia. By the end of November 2022, just 8.5 percent of these companies had sold at least one subsidiary in Russia. These exit rates have changed little since then.
When asked by Blick, the co-author of the study, Simon Evenett (53), confirmed that this number includes all exits – regardless of whether they were enforced by sanctions or not. “The fact that the percentage of completed exits is so low, including sanctions, is remarkable,” says Evenett.
It becomes even more remarkable if you take a closer look: Of a total of 114 G7/EU companies with Russian subsidiaries that are active in the raw materials and agricultural sectors, just 9 have left Russia. This means that the rate of completed exits in the sensitive raw materials sectors at 7.9 percent is even below the average of 8.5 percent. Raw materials in particular are at the center of the sanctions against Russia.
Europeans are increasingly staying in business
Confirmed divestitures by EU/G7 companies with equity interests in Russia account for 6.5 percent of total pre-tax profits of all companies surveyed, as well as 8.6 percent of property, plant and equipment, 8.6 percent of total assets, 10.4 percent of operating income and 15.3 percent of all employees. For the study, Evenett relies on information from the renowned company database Orbis.
These results suggest that the withdrawing companies had, on average, lower profitability but a larger workforce. According to Evenett, this could have helped them gain more public attention.
However, European companies in particular have hardly withdrawn. Companies based in the USA or Japan have been much more active in doing business in Russia. Still, the results indicate that fewer than 18 percent of US subsidiaries were actually divested. With Japanese companies it was 15 percent, from the EU area only 8.3 percent.
Of the Western companies remaining in Russia, 19.5 percent are German, 12.4 percent are American, and 7 percent are Japanese multinationals. “These results question the willingness of Western companies to decouple from economies that their home country governments now view as geopolitical rivals,” concludes Evenett. The study results are a “reality check” for the claim that national security concerns and geopolitical considerations are leading to a fundamental reversal of globalization.
What about Switzerland?
Swiss companies are not included in the study. Not even those from Australia, New Zealand, Norway or Singapore – all important industrial nations, but not part of the G7 or the EU. According to Evenett, the study focused on G7 and EU companies “because the governments involved took the lead in imposing sanctions on Russia.” These countries also account for a very large proportion of all Western companies that are active in Russia. “We therefore believe that we have adequately recorded what happened,” says Evenett.
Incidentally, the same analysis is currently being carried out for Swiss companies.