IT TOOK MORE than 30 years for BP, a British energy firm, to build its Russian business. It took only four days to decide whether to demolish it. As Vladimir Putin’s forces invaded Ukraine early on February 24th, the logic of BP‘s 20% stake in Rosneft, Russia’s state-owned oil giant, began to collapse. BP‘s board met to discuss the matter on February 25th; later that day Britain’s business secretary, Kwasi Kwarteng, expressed the government’s concerns to Bernard Looney, BP‘s boss. By February 27th the board was ready to make its decision public: BP would sell its stake in Rosneft. Rosneft’s board has been resigned by Mr Looney (as well as his predecessor Bob Dudley). The company may face a write-down of up to $25bn.
Mr Putin’s war has prompted a reckoning for multinational companies. Russia poses a number of risks. These include reputational damage, logistical disruptions and the risk of violating sanctions. Many firms will not suffer any harm from Russia’s tiniest market. Others will find it difficult and financially draining.
Many other multinationals have, like BP, spent decades prospecting for opportunity in Russia. In 1974 Pepsi became the first Western product made and sold behind the Iron Curtain. Disney hoped to charm sullen Soviets with screenings of “Snow White” and “Bambi” in Moscow and Leningrad in 1988. More companies arrived after the collapse of the Soviet Union–Danone, a French yogurt-maker, peddled its snacks from a store on Tverskaya Street in Moscow in 1992. BP opened its first petrol station in 1996.
Now companies are racing to devise new strategies for an uncertain era. Entities with the most to lose made the best deals with Russia. Norway’s sovereign wealth fund announced that it would block all Russian equities investments, which account for 0.2% of its portfolio. Companies that have a large Russian market exposure are more cautious. Renault and Danone, both carmakers, are more cautious. They earn 9% and 66% respectively in Russia.
Many Western businesses find themselves somewhere in between. They respond in a similar manner: it is more of a pause than a rupture. UPS has suspended Russian deliveries. FedEx and UPS are two American logistics companies. CMA CGM, Maersk and MSC, three European shipping giants, said they would not sail there for now. Three management consultancies in Russia, Bain, Boston Consulting Group, and McKinsey are changing their strategy. Boeing has stopped parts, maintenance, and technical support deliveries to Russian airlines using its aircraft.
Some of these actions were doubtless provoked by companies’ fears that they might fall foul of an expanding array of Western sanctions against Russia. Volvo, a Chinese-owned carmaker with a Swedish base, stated that there were potential risks in trading with Russia. This included the sanctions imposed in the EU “. Similar concerns are shared by others.
But companies are fielding explicit or implicit demands from their home governments and, in some cases, domestic consumers in effect to boycott Russia even beyond the scope of official measures. Apple stopped selling products in Russia on March 1, 2015. Disney and other Hollywood studios have stated that they will not release films on Russian screens. Google, Meta, and Twitter want to restrict Russian propaganda via their online platforms.
Some of these moves present quandaries for companies. For example, any decisions made by tech companies in Russia could complicate their position in other countries. Apple’s firm stance on the Ukraine war highlights its historically compliant position in China. This giant market has not invaded any of its neighbours, but is accused of human rights abuses by its rulers. McKinsey declares that it will not do business in Russia with “any government entity”. This is after years of criticisms for its cooperation with state-backed companies in China and Russia.
Complying with demands from governments seeking to punish Mr Putin presents practical problems for firms, as well as moral and reputational ones. Non-Russian companies leasing aircraft to Russian airlines are an example. They have more than 500 jets and turboprops in the country, according to Cirium, a consultancy. Those lessors have the unenviable task of trying to recover the planes before sanctions against the supply of aircraft t