A Plethora of Multinational Companies Announce Suspension of Operations in Russia
Multinational corporations are suspending operations in Russia as both sanctions and public pressure pile up as a result of its invasion of Ukraine.
Amid an economy in turmoil, Russians are left with a shrinking marketplace of goods and services. Companies such as Chanel and Apple have closed stores or shut down supply chains, and FedEx is halting all shipments to Russia. Social media company TikTok is no longer allowing uploads from Russian users, and car companies including Rolls-Royce, Toyota, and Volkswagen stopped shipping vehicles to the country.
Sanctions, airspace closures and departures of international companies threaten to cut off Russians to an extent unseen since the Soviet era.https://t.co/2dWsxY5kla— The Washington Post (@washingtonpost) March 9, 2022
Levi Strauss & Co announced on 7 March that it would pause commercial operations in Russia and donate more than $300,000 in humanitarian aid to Ukrainian refugees, NPR reported. The company cited “the enormous disruption occurring in the region, which makes normal business untenable” as a reason for the suspension.
Unilever—manufacturer of Dove soap and Knorr soap, among many other essential food and hygiene products—announced Tuesday that it would stop imports and exports out of Russia after the country’s invasion of Ukraine. Reuters reported that Unilever would not invest any further in Russia and would stop all media and advertising spend there.
Cosmetics giant Estée Lauder announced that it would suspend all commercial activity in Russia, “including every store we own and operate, as well as our brand sites and shipments to any of our retailers in Russia.” The company also noted that it is taking steps to support the safety of its employees in Ukraine, including continuing compensation, maintaining regular communications, and offering relocation assistance.
McDonald’s temporarily closed its 850 restaurants in Russia, but it will continue to pay its 62,000 Russian employees while the stores are closed, according to The Washington Post.
“Our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” said McDonald’s CEO Chris Kempczinski.
Other global brands have pulled the plug in Russia. Starbucks’s licensed partner Alshaya Group will temporarily shutter 130 stores in the country, and the company will halt all shipments of Starbucks products into Russia. Coca-Cola and PepsiCo have both suspended business, halting soda sales.
Some retail and restaurant chains that are largely run by franchisees—including Yum Brands’ Pizza Hut and KFC—may have more trouble closing shop. But Yum Brands announced Tuesday that it is suspending operations on all KFC company-owned locations in Russia and is finalizing an agreement with its master franchisee to suspend Pizza Hut operations, the Post reported.
McDonald's is temporarily closing its 850 locations in Russia, in one of the most symbolic exits by a global corporation from the country in protest over Russia's invasion of Ukraine. https://t.co/r7iVfb17yP— NPR (@NPR) March 8, 2022
“This action builds on our decision to suspend all investment and restaurant development in Russia and redirect all profits from operations in Russia to humanitarian efforts,” Yum Brands said in a statement.
Financial players have pulled out as well. American Express announced 6 March that it was suspending all operations in Russia, so globally issued American Express cards would no longer work at merchants or ATMs in the country, and cards issued locally by Russian banks would no longer function outside Russia on the American Express global network. The company also suspended all business operations in Belarus.
PayPal suspended all operations in Russia, although a spokesperson said that the exit will take some time as the company processes customer withdrawals to ensure account balances are dispersed in line with applicable laws and applications, according to The Wall Street Journal.
Visa Inc. and Mastercard Inc. also stopped handling transactions for Russian-sanctioned financial institutions, and they suspended all operations in Russia following the invasion of Ukraine.
A Mastercard statement after the announcement noted that it is remaining vigilant to ensure the safety and security of the global payments ecosystem.
“Our Cyber & Intelligence teams will continue to work with governments and partners around the world to ensure that stability, integrity, and resiliency of our systems continue to guide our operations and response to potential cyberattacks,” Mastercard said.
The decision to exit a market is already complex. Geopolitical and military tensions make it more so, especially when the threat of cyberattacks looms large.
Our hope is that companies will move proactively so that they can implement a plan consistent with their values and protective of individuals. Waiting to be forced out of the market eliminates your ability to act in a way you be proud of in the future. pic.twitter.com/s4apOMs6NA— Alex Stamos (@alexstamos) March 4, 2022
According to a set of recommendations from KSG Intelligence Services—specifically from founder of the Stanford Internet Observatory Alex Stamos and former U.S. Cybersecurity and Infrastructure Security Agency (CISA) Director Chris Krebs—executives considering a controlled exit from Russia must:
- Consider scenarios for an exit, firmly deciding what scenarios will trigger an organization to leave. This could include triggers for a one-hour exit (direct targeting by Russian forces, loss of Internet, or a nuclear accident) or a 24-hour exit (imposition of martial law, military escalation, fall of the Ukrainian government).
- Determine guiding principles and anchor any critical decisions in the organization’s core values.
- Convene an executive committee to create an exit plan, both within the one- and 24-hour timeframes.
- Convene operational teams to begin preparation and take all action short of starting the exit plans. This should involve IT, communications, and operations teams looking at workforce safety, technology security, and internal and external communications.
- Execute the exit. In the event that an exit is triggered, company leadership should act swiftly and decisively.
“Extenuating circumstances may require your organization to remain in Russia, in the short- or long term, but KSG has advised its clients who are able to exit the country to do so as soon as possible,” Stamos and Krebs wrote. “This advisory is meant for the executive team of multinational corporations with relatively minor operations remaining in Russia. If your organization has a more significant presence—facilities, factories, IP, or large numbers of employees—in the region, or faces other extenuating circumstances, additional preparation will be necessary immediately.
“We should note that any exit from Russia may be in violation of current or future Russian law (and that future laws may be enforced retroactively), nothing in this advisory constitutes legal advice, and you should include legal counsel in all planning, decision-making, and implementation,” they continued.