Soon after Russian troops invaded his country, Ukrainian President Volodymyr Zelenskyy made a plea to Western companies: “Leave Russia,” he said. “Make sure that the Russians do not receive a single penny.”
Hundreds of companies answered the call. Politicians and activists predicted that it would help strangle the Russian economy and undermine the Kremlin’s war effort.
Russian President Vladimir Putin had other plans.
Putin has turned the exits of major Western companies into a windfall for Russia’s loyal elite and the state itself. He has forced companies wishing to sell to do so at fire-sale prices. He has limited sales to buyers anointed by Moscow. Sometimes he has seized firms outright.
A New York Times investigation traced how Putin has turned an expected misfortune into an enrichment scheme. Western companies that have announced departures have declared more than $103 billion in losses since the start of the war, according to a Times analysis of financial reports. Putin has squeezed companies for as much of that wealth as possible by dictating the terms of their departure.
He has also subjected those exits to ever-increasing taxes, generating at least $1.25 billion in the past year for Russia’s war chest.
No private deal is safe. Dutch company Heineken, for example, found a buyer this spring and set a price. But the Russian government unilaterally rejected the deal, people close to the negotiations said, and put the company’s Russian holdings in the hands of an aerosol-packaging titan married to a former Russian senator.
In all, Putin has overseen one of the biggest transfers of wealth within Russia since the fall of the Soviet Union. Huge swaths of industries — elevators, tires, industrial coatings and more — are now in the hands of increasingly dominant Russian players.
In some cases, that player is the state. Government-owned enterprises have acquired the assets of corporate giants such as Ikea and Toyota. In many cases, Putin personally signs off on sales.
“These are good deals for us, for sure,” said Anton Pinsky, a prominent restaurateur who joined with a pro-Putin rapper and associates of a powerful senator to take over Starbucks. In an interview in Moscow, he downplayed the significance of his own deal but was clear about the effect of the Western departures.
“You screwed up, left it,” he said. “We picked it up inexpensively. Thank you.”
Today in Russia, a robust consumer world carries on, helping Putin maintain a sense of normalcy despite a war that has proved longer, deadlier and costlier than he predicted.
Most foreign companies remain in Russia, unwilling to lose the billions they’ve invested there over decades. Other businesses have been sold and now have a through-the-looking-glass feel. Krispy Kreme is now Krunchy Dream. Starbucks has been reborn as Stars Coffee; its mermaid is now a Russian swan princess.
These companies can buy raw materials domestically or import them from friendly countries. And customers can still easily buy products that have supposedly been pulled from shelves.
Putin’s economic counterstrikes have helped to fortify support among the elites profiting from the war and to blunt the effects of Western isolation. While Ukraine is preoccupied with short-term imperatives such as shoring up international support, the relative resilience of the Russian economy has enabled Putin to play a long game.
Previously undisclosed documents, financial statements and interviews with dozens of deal-makers in Russia and across Europe show that Moscow now micromanages practically every exit. Companies must navigate an opaque system to win approval to sell.
The wave of departing companies has stung. It has sent a global signal that Russia is a business pariah. The economy is strained and at risk of overheating. Putin’s handling of Western departures has only reinforced Russia’s image as a dangerous place to do business. Even some top Russian officials admit that decreased competition and foreign investment will hurt everyday Russians and the economy in the long term.
The Kremlin says it prefers that companies remain in Russia. But Putin scoffs at the notion that leaving will hurt. “Did they think everything would collapse here? Well, nothing of the kind happened,” he said this month. “Russian companies took over and moved on.”
Hanging over the exit process for Western firms is the threat of intimidation and force.
Last summer, Putin seized the Russian arm of Danish brewer Carlsberg, along with roughly a half-billion dollars in cash, and put them under the temporary control of one of his friends.
At least four other companies have similarly lost control of their operations this year to effective state seizures.
Today, Putin is at the helm of a fraught exit process that works to Russia’s advantage. But it began in the early days of the war with the urgent goal of simply keeping the Russian economy alive.
Blocking the Exits
Speaking from the White House two weeks after the February 2022 invasion, President Joe Biden boasted that the West was crushing the Russian economy. “The list of businesses and international corporations leaving Russia is growing by the day,” he said.
Things looked bleak for Putin. The stock exchange in Moscow was closed, and the ruble had crashed. If Russia lost all the jobs, production and cash of Western companies, the effects would be devastating.
But Putin was preparing his financial rejoinder. He restricted the movement of money abroad and required that companies from “unfriendly nations” win approval before selling their businesses.
Putin was putting the brakes on just as Western executives faced pressure to accelerate. In the United States, there was perhaps no more vocal figure than Yale University management professor Jeffrey Sonnenfeld. He appeared on cable news programs, criticizing companies that remained in Russia.
Sonnenfeld recalled that it was corporate boycotts — more than sanctions — that helped abolish apartheid in South Africa. He transformed his office into a sort of war room, with a Yale team grading companies on their efforts to sever Russian ties.
The question of who would end up with those companies was of little concern.
“If Putin thinks he can do better at the deep fryer, let him have at it,” he said in an interview. “We really don’t care. The important thing is to not have the endorsement of a renowned global brand.”
Sonnenfeld’s list and others like it added to pressure from shareholders, Ukrainian activists and everyday consumers. — The New York Times
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