Get out of Russia – withdrawal for companies becomes an obstacle course

Because bureaucratic obstacles, legal uncertainty and a lack of bankers make it difficult for many Western companies to permanently sever their financial relations with the Russian market. Some want to keep open the option to return at some point in the future. Others accept high depreciation. But one thing is clear from the decree Russian President Vladimir Putin just passed, taking control of a natural gas project involving foreign companies like Shell, Mitsui and Mitsubishi: act fast or not at all.

The boss of Finnish coffee roaster Paulig, Rolf Ladau, took the advice early on. He managed to get out very quickly after the Russian attack on Ukraine. When Western sanctions were imposed on Russia in late February, the manager realized that his business model was no longer viable there. While coffee was not on the sanctions list, it became almost impossible to get the beans into the country as logistics companies halted shipments to and from Russia. Payments in rubles became increasingly difficult. Ladau pulled the ripcord – and found a buyer within months. In May, the Russian business went to an Indian investor.

turn your back on Russia

Such processes sometimes take years. More than a thousand Western companies want to do the same and turn their backs on Russia. But only a few companies have permanently abandoned their business or handed over the keys to their production to local managers. Fewer than 40 major companies, including McDonald’s and Renault, have done so, according to a Reuters survey. Because goodbye is complicated. Consumer goods group Henkel, for example, is still seeking definitive solutions to split off its Russian business. Options range from sales to handing over to Russian management to the cessation of individual operations. Henkel boss Carsten Knobel wants to complete the sale by the end of the year.

Virtual Negotiations

There are many obstacles to Russian withdrawal: the legal situation is opaque and there is confusion about what measures Russia will allow. The workforce is insecure and fears reprisals if the business goes out. A reliable and liquid buyer must be found in a short period of time. Selling prices are also falling because potential buyers are aware of the pressure companies are under. Negotiations must also be done virtually, because many Western managers avoid traveling to Russia out of fear. And the government in Moscow is preparing a law that would allow it to take control of local businesses from companies that want to leave the country. The pressure is building.

Problems are also lurking in the companies that have announced their withdrawal and believe that they will manage to implement it. Burger King, for example, canceled support for its branches in Russia last March. But they are still not closed. Complex contracts made that difficult, lawyers say.

There are no plans to retreat

Italian bank Unicredit has expanded its search for a buyer to countries such as China and India because no suitable bidder was found in Russia itself. There are no plans to retire, many companies must choose their own paths. Solutions to hand over production facilities to Russian management are popular – but this can lead to painful downgrades. Some companies hope to regain access to their factories once the war is over.

But another factor makes sales difficult – there is simply a lack of bankers who can accompany transactions in Russia. Many major financial institutions have kept their hands off these deals for fear of running afoul of Western sanctions – which in normal times almost never go without them. The companies must now rely on lawyers in Russia and local advisers to find liquid and reliable buyers who are also not allowed to be on any of the Western sanctions lists. “If you haven’t started the process yet, it will be even more difficult to leave Russia in the future,” says Ladau. “It’s not in Russia’s interest to just let companies leave the country.”


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