Trump's return adds new twist to Western firms' Russia exit dilemma
Published: 03:01 PM,Jan 20,2025 | EDITED : 07:01 PM,Jan 20,2025
Hold or fold? That is the dilemma facing the hundreds of Western companies still operating in Russia as Donald Trump returns to the White House with a promise to end the Ukraine conflict while Moscow's tougher exit conditions make it costlier to leave. Many companies, including Renault, McDonald's and Heineken have left Russia since Moscow sent troops into Ukraine in February 2022, usually taking hefty writedowns and selling their assets at steep discounts demanded by the Kremlin.
Others have stayed. Makers of food and hygiene products, such as PepsiCo, Procter & Gamble and Mondelez have maintained a presence citing humanitarian reasons. European lenders Raiffeisen Bank International and UniCredit remain ensnared by profits stuck in Russia and the need for exit approval from Moscow.
Russia tightened its exit terms in October to encourage businesses to stay, demanding discounts of at least 60% on exit transactions and a 35% 'voluntary contribution' to Russia's budget from the deal price, termed an 'exit tax' by Washington. Reuters spoke to 15 lawyers, bankers, advisers and business people involved in dozens of Western corporate exits from Russia for this story. They said that companies still present would be carefully watching what Trump, who will be sworn as president of the United States on Monday, can deliver and adjusting their plans accordingly. Some requested anonymity to speak freely.
'Trump's election victory adds another layer of uncertainty for multinationals with assets in Russia,' said Ian Massey, Head of Corporate Intelligence, EMEA, at global risk consultancy S-RM. 'While the Kremlin continues to ratchet up the costs of leaving the Russian market, Trump may reduce the costs of staying, creating a kind of stasis.' It is far from clear what Trump can accomplish in his second term, with his advisers now conceding the conflict will take at least months to resolve.
Yet his mere arrival may give some companies the political cover to stay on in Russia, while others could see prospects for potential sanctions relief as an opportunity to leave.
'We might see some sanctions being dialled down if the new administration is able to negotiate a settlement of the conflict in Ukraine,' said Alan Kartashkin, Partner at Debevoise and Plimpton. That could unfreeze some foreign-owned assets stuck in Russia, unlocking another wave of exit deals, he said.
Companies already reluctant to leave may be more likely to wait things out, said an M&A investor who has worked on dozens of deals. Another person, who has advised on over 100 exits, said Trump's return may also cause those looking to cut ties with Russia to change plans and decide to stay.
Alexei Yakovlev, director of the finance ministry's financial policy department, said in December that negotiations on exit deals were ongoing, without naming specific companies.
Asked whether Trump's arrival may pause exits or see some companies return, he said: 'That's beyond our understanding.'
A lot has changed since the relative free-for-all in dealmaking of 2022, six of the people said, particularly in terms of navigating the whims and demands of the exit committee.
Russia's government is keen to protect the federal budget and close loopholes that allowed local buyers to snap up assets on the cheap. deals now require valuations by independent appraisers selected by Russia's economy Ministry, and auctions for assets between local buyers.
Russian President Vladimir Putin must approve deals over 50 billion roubles ($488 million) and buyers must demonstrate economic grounds for any deal, such as showing how their failure to buy a particular factory might cause a drop in output.
'The possibility of selling a large asset at the minimally accepted conditions is significantly limited,' said a Russian lawyer. — Reuters
Others have stayed. Makers of food and hygiene products, such as PepsiCo, Procter & Gamble and Mondelez have maintained a presence citing humanitarian reasons. European lenders Raiffeisen Bank International and UniCredit remain ensnared by profits stuck in Russia and the need for exit approval from Moscow.
Russia tightened its exit terms in October to encourage businesses to stay, demanding discounts of at least 60% on exit transactions and a 35% 'voluntary contribution' to Russia's budget from the deal price, termed an 'exit tax' by Washington. Reuters spoke to 15 lawyers, bankers, advisers and business people involved in dozens of Western corporate exits from Russia for this story. They said that companies still present would be carefully watching what Trump, who will be sworn as president of the United States on Monday, can deliver and adjusting their plans accordingly. Some requested anonymity to speak freely.
'Trump's election victory adds another layer of uncertainty for multinationals with assets in Russia,' said Ian Massey, Head of Corporate Intelligence, EMEA, at global risk consultancy S-RM. 'While the Kremlin continues to ratchet up the costs of leaving the Russian market, Trump may reduce the costs of staying, creating a kind of stasis.' It is far from clear what Trump can accomplish in his second term, with his advisers now conceding the conflict will take at least months to resolve.
Yet his mere arrival may give some companies the political cover to stay on in Russia, while others could see prospects for potential sanctions relief as an opportunity to leave.
'We might see some sanctions being dialled down if the new administration is able to negotiate a settlement of the conflict in Ukraine,' said Alan Kartashkin, Partner at Debevoise and Plimpton. That could unfreeze some foreign-owned assets stuck in Russia, unlocking another wave of exit deals, he said.
Companies already reluctant to leave may be more likely to wait things out, said an M&A investor who has worked on dozens of deals. Another person, who has advised on over 100 exits, said Trump's return may also cause those looking to cut ties with Russia to change plans and decide to stay.
Alexei Yakovlev, director of the finance ministry's financial policy department, said in December that negotiations on exit deals were ongoing, without naming specific companies.
Asked whether Trump's arrival may pause exits or see some companies return, he said: 'That's beyond our understanding.'
A lot has changed since the relative free-for-all in dealmaking of 2022, six of the people said, particularly in terms of navigating the whims and demands of the exit committee.
Russia's government is keen to protect the federal budget and close loopholes that allowed local buyers to snap up assets on the cheap. deals now require valuations by independent appraisers selected by Russia's economy Ministry, and auctions for assets between local buyers.
Russian President Vladimir Putin must approve deals over 50 billion roubles ($488 million) and buyers must demonstrate economic grounds for any deal, such as showing how their failure to buy a particular factory might cause a drop in output.
'The possibility of selling a large asset at the minimally accepted conditions is significantly limited,' said a Russian lawyer. — Reuters