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Trust built up over years and decades between Western companies and their Russian host has been shattered while the country wages war in Ukraine. For some, it might never come back again

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People walk past a closed H&M clothing store in Omsk, Russia on March 3. The clothing company announced on March 2 that it would temporarily close its 168 stores in Russia in response to the Russian invasion of Ukraine.ALEXEY MALGAVKO/Reuters

On a Thursday morning in early February, roughly three dozen Russia-based managers for some of the West’s biggest blue chip multinationals gathered on the top floor of Moscow’s Baltschug Kempinski hotel for a multihour networking and briefing session on Russia’s business climate.

It’s a relatively informal event held every quarter, with lots of back-and-forth between participants in a room that has a stunning view of the city’s Red Square and the Kremlin. Speaking in front of them to kick off the meeting, with support slides beaming up from a nearby projector, was a balding, bearded and approachable-looking American named Mark McNamee, director of Europe for market intelligence consultancy FrontierView.

A Russian scholar and expert in political, economic and security risk analysis, Mr. McNamee is only 40 but already boasts a cracking résumé: He’s instructed U.S. counterterrorism agents on the rise of jihad in Africa and lectured at the London Institute of Banking on investment decisions in emerging markets. For the past seven years, he’s helped international companies understand the ins and outs of their external environment in Europe and especially Russia.

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As he outlined his assessment of the different elements affecting the region’s business prospects to executives from Domino’s Pizza, Mondi Plc and others, Mr. McNamee pegged the likelihood that the Ukrainian crisis would escalate to some kind of military conflict at 30 per cent. A full-scale Russian invasion with the aim of overthrowing the government in Kyiv? Five to 10 per cent.

Some of the executives in the audience laughed and smirked, Mr. McNamee recalled in an interview. “Others said, ‘That is impossible. It’s zero per cent.’”

If the executives on the ground didn’t take his warnings seriously, their bosses in New York, London and Berlin were desperate for advice. The analyst’s phone had been buzzing just days before with queries from panicked C-suite leaders who had heard the latest U.S. intelligence reports warning of an imminent attack. But in Moscow, there was near-unanimity among the Russia country chiefs of these same corporations that Mr. McNamee’s worst-case scenario was drastically overblown. The general view among the businesspeople in front of him: “Putin is a rational actor. He would never do something like this.”

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A residential building in Borodyanka, Ukraine is destroyed by shelling, as Russia's invasion of Ukraine continues on March 3. In response Governments across the world have imposed sanctions against the Putin regime, with new measures added almost every day.MAKSIM LEVIN/Reuters

What’s happened since is the unthinkable. Ukraine, a country of 44 million people, is being shelled and bombed by the Russian military in a conflict the likes of which Europe hasn’t seen since the Second World War. As Russia tightens its grip on the country, governments across the world are imposing sanctions against the Putin regime, with new measures added almost every day. Among the most significant: Group of Seven countries have prohibited transactions with Russia’s central bank, preventing Russia from deploying its international currency reserves to manage its economy and fund its war effort. Western allies are also targeting the Russian oligarchs.

But this isn’t simply a fight being waged by political leaders. A growing wave of international business has lashed out against Russia with previously unfathomable force, halting operations there, breaking off joint venture partnerships and unwinding investments – and not just to protect their own interests. The corporate pile-on is as unprecedented as it has been swift, the likely consequence of an autocrat who has gone too far in the eyes of many if not most of the world’s business leaders at a time when corporations have never been more sensitive to being on the wrong side of history.

It’s been about 30 years since the Soviet Union’s collapse, which global leaders hoped would usher in a new era of stability and an opportunity for Western corporations in the region they thought they’d never have. Many rushed into Russia like moths attracted to a flame, reassured by governments that had opened the diplomatic path. The idea was that if Communist Russia had been brought into the light, Western-style commerce and trade were going to brighten its prospects further.

Now, however, a darkness has returned and the West’s corporations are scrambling to find their way. This is a moment where the new imperatives of global capitalism – the responsibility to stakeholders and a newly adopted attention to environmental, social and corporate governance – have shaped the collective consciousness of the Western business world and galvanized its response. A dwindling number of companies are choosing to maintain ties to Russia, and those that do will likely face growing demands in the weeks to come to change their minds.

As it stands, more than one-third of U.S. companies that make up the Dow Jones Industrial Index had taken some form of direct action to limit their business in Russia. More are likely to join the list as pressure builds. On Friday, Andy Hunter, president of the American Chamber of Commerce in Ukraine, tweeted: “For God’s sake, I call on US companies and multinationals to immediately shut down all operations in Russia. US companies must stop profiteering in a pariah state that murders innocent women & children and attacks a nuclear power plant in 21st century Europe.”

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Customers queue in an IKEA store in Moscow on March 3. On March 4, IKEA announced that it is temporarily closing its stores in Russia and pausing all sourcing in the country.STAFF/Reuters

Russia has been trying to counter the exodus and has put in place new capital controls to prevent Western firms from selling Russian-based assets. Nor should it surprise anyone if the regime simply seizes their assets in the country, a prospect some European banks are already warning might happen.

Regardless of how this shakes out for corporations and for the economies of Russia and the West as they grapple with the challenges of a possible new Cold War, the clock has been reset. Trust built up over years and decades between Western companies and their Russian host has been shattered. For some, it might never come back again.

In a video address on the day Russia’s attack began, Ukrainian President Volodymyr Zelensky said: “What do we hear today? It’s not just rocket explosions, fighting, and the roar of aircraft. This is the sound of a new Iron Curtain lowering and closing Russia off from the civilized world.”

If the curtain has fallen fast, it might be because Russia’s actions took some Western countries and many of their corporate champions by surprise. Companies that thought they were good corporate citizens in Russia, trying their best to navigate the rules, building wealth and helping make average Russians richer, were suddenly confronted with a new reality imposed by a host government that they didn’t see coming and didn’t plan for. As Mr. McNamee puts it: While the top brass of well-known Western firms were wondering whether they should create crisis response units, their Moscow-based subordinates were saying, “Don’t waste your time.”

Those same companies are acting with urgency now. Automaker Ford Motor Co. suspended operations in Russia, Disney stopped releasing films in the country and Apple Inc. halted sales of iPhones and other products as it condemned Russia’s invasion of its neighbour. International shippers such as Maersk and Hapag Lloyd have stopped taking bookings in and out of Russia as the country becomes increasingly shut out of world commerce.

Oil giant BP PLC set the tone early on. Russia’s biggest foreign investor led the Western-company exodus with its announcement that it would abandon its stake in Russian oil giant Rosneft, a decision that could cost it as much as US$25-billion in writedowns. Rival Shell PLC followed, cutting ties with state-controlled Gazprom.

It’s a far cry from how those same two energy companies responded to Russia’s annexation of Crimea in 2014. At the time, BP’s then-chief executive Bob Dudley said the company operates in countries “that have ups and downs,” while Shell chief executive Ben van Beurden said at the time that “it’s the nature of our industry to live through periods of uncertainty.” Last week Mr. Dudley resigned his seat on Rosneft’s board as part of BP’s exodus, while Mr. van Beurden said Shell “cannot – and we will not – stand by.” The abrupt shift highlights that when it comes to assessing geopolitical risk in boardrooms, there were zones of Russian aggression companies were willing to tolerate, but only up to a point.

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Apple halted sales of iPhones and other products as it condemned Russia’s invasion of its neighbour.ALEXEY MALGAVKO/Reuters

Meanwhile, Canadian companies have also begun dialling back their Russian presence. Toronto-based miner Kinross Gold Corp., which has operated in Russia for more than 25 years, suspended operations at its Kupol mine as well as all activities at its Udinsk development project. The company said it is “deeply concerned about the tragic situation and the extent of casualties and destruction in Ukraine.”

Ski-Doo maker BRP Inc., which has been active in Russia for nearly three decades and has an office in St. Petersburg, paused its exports to Russia, citing “the instability of the current situation and the trade complexities.” Auto-parts manufacturer Magna International idled its Russian plants and luxury parka maker Canada Goose suspended all sales in Russia and donated $100,000 for humanitarian aid in Ukraine. Bombardier Inc. said Friday it is breaking off all dealings with Russian customers, including wealthy individuals who’ve already bought its jets and might want them serviced.

One hundred business leaders signed an open letter to the Canadian government urging Ottawa to step up sanctions on Russia. They also vowed to unwind commercial relationships with the country. The signatories included John Chen, executive chairman of BlackBerry Ltd., and Walied Soliman, chair of Norton Rose Fulbright Canada LLP.

“No one seriously expected such a quick pullback of leading Western businesses from Russia,” said George Voloshin, a corporate intelligence and geopolitical analyst with risk consultancy Aperio Intelligence in Paris. “Indian and Chinese firms will most likely stay put to the extent permitted by sanctions, but access to Western technology and know-how has now been brutally severed.”

The exit by companies is largely due to “the enormous universal pressure which has built up across the Western world” against Russia, making it difficult for brands most closely tied to the country, such as BP, to just sit and wait, Mr. Voloshin said. They did not take the decision with a light heart because they remain profit-driven, he said.

“No one rushed out of Saudi Arabia when it started bombing Yemen” in 2015, Mr. Voloshin said. “This time is different because of the tactic Mr. Putin chose. Had he limited his actions to the recognition of the Donetsk and Luhansk [republics] in Eastern Ukraine, no one would have budged an inch. It’s the fact that he launched all-out aggression against a sovereign state with the stated intention to topple its democratically elected government that led to the situation we are in.”

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Workers take down the branding of English Premier League club Everton's sponsor Megafon at Goodison Park in Liverpool, England, on March 2. Everton said they had 'suspended with immediate effect sponsorship agreements with Russian companies following Russia's invasion of Ukraine.PAUL ELLIS/AFP/Getty Images

There have been other periods in history when corporations have voted with their feet in the face of bad actors on the global stage, but it’s tended to unfold at a glacial pace, said William Reinsch, a former U.S. Commerce Department official now with the Center for Strategic and International Studies, pointing to the decades it took for disinvestment campaigns targeting apartheid South Africa to gain traction with corporations. “That took years, this has taken days,” he said.

While the sheer magnitude and blatancy of Russia’s attack no doubt shocked companies into acting more quickly, Mr. Reinsch said, CEOs today are also more aware than ever of the risks of alienating customers and employees over big moral issues. “Companies have learned that very quickly you can end up behind the curve on this sort of thing.”

And public opinion is decidedly in favour of companies cutting their ties with Russia to punish the country. Nearly three-quarters of Americans surveyed by polling firm Morning Consult on the weekend after the invasion said they want businesses to break with Russia.

Employees and alumni of big Western firms have also taken to social media in droves to shame those companies that were perceived to be dragging their feet. One former senior partner at McKinsey & Company blasted the consulting firm’s managing partner Bob Sternfels on LinkedIn on Tuesday for having “blood money on your hands” for failing to exit Russia. Dozens of similar messages from ex-McKinsey employees filled the site. By Thursday McKinsey said it has stopped accepting client work from Russia and will cease consulting for state-owned enterprises there.

Few Canadians have as much experience and knowledge about Russian business and culture as Lou Naumovski. He has spent the better part of his career building ties between the West and Russia, first as Canada’s former deputy director for trade and investment development in the Soviet Union and Eastern Europe, and later as a senior executive based in Moscow for Visa and Kinross. He now sits on the board of Russian miner GV Gold.

Mr. Naumovski, 65, said he is shocked and emotionally crushed by Mr. Putin’s invasion order. And like many others, he’s not optimistic about what it means for the future.

“A lot of us – meaning the wider Western community involved in businesses over decades in Russia – really felt up until recently that it was a normal place to do business,” he said, adding that he believes the Russian government did improve the investment conditions over the years.

Even after Russia invaded and annexed the Crimean Peninsula from Ukraine, Western businesses remained interested in Russia, Mr. Naumovski said. And those that wouldn’t or couldn’t do business there because of subsequent government sanctions, such as Canadian pork producers, actually helped Russia to become more self-sufficient in sectors such as food and beverages. He said he believes that might have emboldened Mr. Putin to ask whether significant foreign investment in Russia was really needed and maybe even contributed to his war-order calculation.

And what about Russia’s future as host for foreign-based business? “It won’t come back unless Russia pays reparations, unless The Hague gets involved and war crimes are adjudicated. I can’t imagine companies who have left, what signals would they need to say, ‘Oh, well that was a mistake and we can come back now and we’re welcome.’ There would have to be a sea change in Russia’s political positioning before anybody with big money would bother.”

For the average Russian, all of this could mean an unwelcome blast back to the past. Already there has been a run on banks as people try to withdraw savings before their purchasing power is destroyed by a plunging ruble. International travel has also been curtailed since Russian planes are banned from airspace in the United States and other countries.

“Eventually, once the initial shock passes, there’s going to be a black market for Apple phones and computers and other things,” Mr. Naumovski said. “It’s a reconstitution of the shortages that made life in the Soviet Union so miserable.”

The job losses from the corporate exodus alone are already shaping up to be staggering, with layoffs by Western companies numbering in the tens of thousands and likely to climb far higher. The 2,300 Russian employees axed by professional-services giant Accenture when it discontinued operations there on Thursday will have a difficult time finding similar well-paying jobs, since many of the consulting firm’s big rivals are also pulling out of the country.

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Russians queue to withdraw cash from at ATM in a Moscow shopping mall on Feb. 27. Already there has been a run on banks as people try to withdraw savings before their purchase power is destroyed by a plunging ruble.Sergey Ponomarev/The New York Times News Service

Back in Canada, David Ross had been nervously following the buildup of Russian troops on Ukraine’s borders for weeks. When the invasion finally began it hit him “like a sledgehammer,” said the Ottawa-based entrepreneur, who grew up on “stories of Ukraine, pirogies and cabbage rolls” since his mother’s parents emigrated from that country in the early 1900s.

After posting about his anguish on social media, the owner of Ross Video, an Ottawa-based company that designs and manufactures equipment for live events and video production, joined many other Canadians who were cutting cheques to the Red Cross’s Ukraine campaign. Ross Video’s donation was for $100,000.

Still, Mr. Ross felt compelled to do more. As one of the largest private companies in the sector, with sales expected to reach $350-million this year, Ross Video boasts customers in more than 100 countries. While Russia accounts for a modest 1 per cent of the company’s business, among its customers there is a broadcast chain with dozens of television stations, and it has been regularly spewing state-fed, anti-Ukraine messages to its viewers.

“It was galling to see our equipment being used as part of a propaganda offensive against the people of Ukraine,” he said. So, on Feb. 28, he and the company’s senior management team decided to cease all shipments of new equipment to Russia and suspend all support for its existing equipment in the country.

Since then Mr. Ross has watched as scores of other global businesses have also amputated their exposure to Russia. He sees it as a natural extension of a growing awareness among businesses that they have responsibilities that go beyond the bottom line.

“‘Greed is good’ was a statement from the 1980s, and I don’t believe that’s what business is about in the 2020s,” he said. “Our employees don’t look to companies as a vehicle that is purely there to make money. They want to work for a company that is willing to do the right thing.”

As for when he thinks Ross Video will start doing business again with Russia, he isn’t expecting Russia to suddenly see the error of its ways. “This could take a very long time,” he said. “We are absolutely prepared to pretend that Russia no longer exists for as long as it takes.”

Over in Waterloo, Ont., Kurtis McBride, chief executive officer of Miovision Technologies Inc., said his company won’t do business with any Russian clients until the invasion of Ukraine is over. The tech company, which has offices in Canada, the U.S., Germany and Serbia, has worked with 1,500 customers in 63 countries to monitor and manage traffic through sensors and artificial intelligence.

Mr. McBride said he was inspired to make the move after reading a LinkedIn post from a former employee who grew up in Ukraine and was trying to stay in contact with his mother, who is still in the country.

“He was a guy I worked closely with talking about someone that’s close to him, his mother, and being afraid that something terrible had happened,” Mr. McBride said. “It just made me think, it’s not an abstract newsreel for me any more.”

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Russian vodka has been removed from shelves at a Virginia Alcoholic Beverage Control Authority store in Arlington, Virginia, on Feb. 28.STEFANI REYNOLDS/AFP/Getty Images

He said he hoped that more companies would cut ties with Russia to pressure the Putin regime to drop its attack on Ukraine. In particular, he said tech companies like his could make their mark by banding together and disrupting the services that Russian citizens rely on.

Two provinces east in New Brunswick, global French-fry giant McCain Foods halted construction of a new potato-processing facility in the Tula oblast region, south of Moscow, shortly after fighting began last week. The company also said it was re-evaluating the future of the project, which if completed would be the company’s first in Russia at a cost of $210-million (at current exchange rates).

Meanwhile, institutional money managers in Canada and around the world have found themselves holding a toxic stew of Russian equities in their portfolios they are having a difficult time unloading.

Among the Canadian asset managers caught in the downdraft is AIMCo, the provincial pension and government fund manager in Alberta. On March 1, the Crown corporation said it had made a “values- and value-driven” decision to divest all of its Russian holdings, which had been purchased by third-party managers and, at $99-million (as of Feb. 28), accounted for 0.06 per cent of AIMCo’s $160-billion in total assets it manages for clients.

“AIMCo and our clients have standards, and this violated our collective standards, in addition to it being an investment decision,” said Evan Siddall, AIMCo’s CEO, though the fund manager has only been able to unload part of its Russian holdings because of restrictions on share sales imposed by Russia to stop investors from fleeing.

In the wake of the crisis in Ukraine, Mr. Siddall says the agency has launched a review of its whole portfolio “to make sure it’s consistent with values and value across the board.” That means looking at whether investments are in countries “where there’s concern about rule of law, and the investibility of those jurisdictions,” he said.

Mr. Siddall doesn’t easily foresee a time when the world’s attitudes toward Russia go back to the way they were. The scope of the “unprecedented” global response to Russia’s actions reflects “how repugnant the invasion of a sovereign nation is, and has changed perspectives on Russia as a place to invest.”

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On March 1, U.S. automaker Ford suspended operations in Russia, namely Ford Sollers, a joint venture of Ford with Russian partners.ANTON VAGANOV/Reuters

When the shrapnel eventually stops flying, European and North American companies are unlikely to rush back into Russia. “If peace were to miraculously break out it would have to be peace with complete withdrawal from Ukraine,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

But even if Russia completely turned a corner – and by that, Mr. Hufbauer means if Mr. Putin were deposed or assassinated and a new government came in promising openness and transparency – even then, “companies are going to be extremely skeptical about going back for a very long time.”

The massive show of C-suite solidarity of the past week has raised awkward questions about how companies might respond to future geopolitical tensions, with much of the focus on China’s aggressive stance toward Taiwan.

Russia’s economy is tiny compared to China’s, making it relatively painless to do the right thing. “For a lot of North American companies pulling out of Russia, the stakes aren’t that high,” Mr. Reinsch said. “If the Chinese invaded Taiwan I believe you would see this scenario repeat itself, but the decision would be a lot harder.”

Which companies have cut ties with Russia?

Energy and mining

British energy giant BP PLC was among the first big global companies to cut ties with Russia, vowing to sell its 20-per-cent stake in Russian state-owned oil company Rosneft. Other energy companies followed in announcing the end of joint ventures with Russian firms, including Shell PLC, Norway’s Equinor, and ExxonMobil. Toronto-based miner Kinross Gold Corp. suspended operations at a mine and a development project in Russia.


Most major automakers with operations in Russia have put production on hold, including Mercedes-Benz AG, Renault SA, Toyota Motor Corp. and Volkswagen AG, while Ford Motor Co. suspended operations at its joint venture commercial van manufacturer. Canadian auto-parts manufacturer Magna International Inc. said it was halting production at its six plants in Russia, which employ 2,500 people. Many other automakers also vowed to cut off sales of their vehicles to Russia, including Harley-Davidson Inc., General Motors Co., Porsche AG and Bentley Motors Ltd. Meanwhile, in the skies, aircraft manufacturers Boeing Co. and Airbus SE announced they’d halted support services for Russian airlines. Delta Air Lines Inc. suspended its code-sharing partnership with Aeroflot. As for Quebec’s Bombardier Inc., which does 6 per cent of its private-jet business in Russia, the company cut all ties to its Russian clients, including all forms of technical assistance.

Consumer goods and retail

Some of the most prominent global consumer giants – McDonald’s Corp., Starbucks Corp., The Coca-Cola Co., PepsiCo Inc. and packaged-goods giant Unilever PLC – are suspending operations in Russia. Canada’s McCain Foods Ltd. says it is ending construction of its first Russian manufacturing plant and halting sales to the country. Several international beer companies halted deliveries to Russia, including Czech brewer Budejovicky Budvar np, for which Russia is its largest market, and Carlsberg A/S. Canadian Ski-Doo maker BRP Inc. hit pause on exports to Russia, as did luxury parka maker Canada Goose Holdings Inc. Nike Inc. just isn’t doing it (all its stores in Russia have closed) while other retailers including Ikea Group Corp. and H&M Hennes & Mauritz AB also closed up shop. And Russians can forget about ordering goods from out of country to get around the bans. Both FedEx Corp. and United Parcel Service Inc. have stopped delivering shipments there.


A number of major U.S. tech companies have taken steps to block Russian access to their services, including Facebook parent company Meta Platforms Inc., Twitter Inc., property rental company Airbnb Inc. and Alphabet Inc., which owns Google and YouTube. Apple Inc. put a stop to sales of its iPhone and other devices in Russia, as did computer maker Dell Technologies Inc. On Friday, Microsoft Corp. joined the action, banning the sale of all new products and services in Russia.

Finance and investments

In Canada and around the world, investment firms have rushed to unload their holdings of Russian securities, though sales restrictions imposed by the government there are making that difficult. Canadian fund managers Mawer Investment Management Ltd. and Purpose Investments Inc. said they’re divesting all Russian stocks, as are institutional money managers Alberta Investment Management Corp. and PSP Investments. Meanwhile both Visa and Mastercard have blocked some Russian financial institutions from their credit-card networks.


Finally, an entertainment curtain has lowered around Russia, blocking citizens from accessing international music, movies and television shows. Streaming service Netflix Inc. is offline in Russia, while Walt Disney Co., WarnerMedia, Sony Pictures Entertainment Inc. and Paramount Pictures Corp. have ceased distribution of their films.

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