Ukraine is making a compelling case for global companies to divest from Russia and relocate to Ukraine instead, citing the ongoing seizure of foreign companies’ assets by Moscow. Russian President Vladimir Putin recently signed a decree to take control of the Russian subsidiaries of French food producer Danone and Danish brewer Carlsberg, placing them under “temporary administration.” Since Russia’s illegal invasion of Ukraine in February 2022, approximately 1,000 international firms have initiated the process of exiting the country, but many are still struggling to sell their assets successfully.
This recent move marks the first time that Russia has taken over the subsidiaries of Western companies since seizing Finnish and German energy companies in April. The Kremlin has suggested that these seizures were in retaliation for Western seizures of Russian assets. Sergiy Tsivkach, the CEO of UkraineInvest, a government agency focused on attracting foreign direct investment to Ukraine, is urging companies with operations in Russia to follow suit. Tsivkach emphasizes the importance of CEOs considering not only the ethical implications but also the business case for fully divesting from Russia.
“We understand that there may be difficulties with selling your businesses and leaving Russia, but that should be a top priority for every CEO of an international company operating in Ukraine,” Tsivkach stated. “It is crucial to demonstrate that the aggressor should not receive any investments or operations from international companies.”
According to the Yale School of Management, over 1,000 companies have publicly announced their voluntary reduction of operations in Russia beyond what is required by international sanctions. However, several companies continue to operate undeterred. Tsivkach believes that companies need to make decisions promptly, highlighting that Russia, as an illegal invader of its neighbor, cannot be trusted as a business partner.
Tsivkach’s comments were made before Russia seized the Russian subsidiaries of Carlsberg and Danone. Carlsberg, in a statement, expressed the need to assess the legal and operational consequences of this development and take appropriate action. The company had already announced its intention to sell its business in Russia, but the prospects for the sale process are now uncertain. Danone also stated that it is investigating the situation and will take measures to protect its rights and ensure continuity of operations.
In addition to the seizure of companies, Russia also terminated the Black Sea Grain Initiative, a significant humanitarian corridor for Ukrainian grains to reach global markets. This move came shortly before the U.N.-brokered deal expired. With the unpredictable environment in Russia, Tsivkach suggests that it could take decades before companies consider returning to the country.
While allies of Ukraine pledged nearly $60 billion for recovery and reconstruction efforts, many investors are hesitant to invest in the country due to the ongoing war. David Roche, President of Independent Strategy, believes that the investment needed to secure Ukraine’s future should come from NATO, not businesses. However, he argues that the arms provided to Ukraine are not sufficient to help the country win the war. Roche highlights the importance of NATO fulfilling its guarantees to encourage private sector investment in Ukraine. He also suggests that a prolonged war benefits Russia, as NATO is unlikely to allow Ukraine to join the alliance while the conflict is ongoing.
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