The price of doing business in Russia

When Russia initiated its full-scale invasion of Ukraine, numerous international businesses hastily withdrew from the market. Nestlé, a Swiss food and beverage company, remained in Russia, citing its commitment to ensuring the population's access to food. However, on September 17, the Russian government temporarily took control of Nestlé Russia, potentially leading to the company's seizure or nationalization.

Other companies, such as French supermarket chain Auchan and German food wholesaler Metro, have also had their assets placed under external control. The Kremlin has linked these actions to the geopolitical context of its war in Ukraine, describing the targeted companies as "unfriendly countries" actively involved in military actions against Russia.

The potential return to previous business operations appears unlikely, as the Kremlin ties its decisions to the ongoing conflict. Foreign firms that leave Russia face steep penalties, including a 60% discount on asset sales and a 35% contribution to the state budget based on the market value of those assets. Despite the risks, some companies may choose to remain in Russia, hoping to regain access once the war concludes and Putin's leadership ends.

Russian officials have hinted at a willingness to engage with such firms, provided they keep their employees and technology while operating under a different brand. However, geopolitical analyst Alexander Kokcharov warns that the Kremlin prioritizes the war effort over maintaining business relationships, and the political system is concentrated on achieving its objectives in Ukraine.

Companies that continue to operate in Russia face significant risks, as their assets may be expropriated by the Russian state.