Western Companies Pull Out of Russia

It took BP less than four days to decide to dismantle its Russian business it had taken more than 30 years to build.

As Vladimir Putin’s forces invaded Ukraine the logic of BP’s 20 percent stake in Rosneft, Russia’s state-owned oil giant, began to collapse.

BP’s board met to discuss the matter and Britain’s business secretary, Kwasi Kwarteng, expressed the government’s concerns to Bernard Looney, BP’s boss. It didn’t take long for the decision to be made, BP would sell its stake in Rosneft and Looney would resign from Rosneft’s board (as has his predecessor, Bob Dudley). The company may face a write-down of up to US$25 billion (NZ$36.7b).

Putin’s war has prompted a reckoning for multinational companies. Russia presents a host of risks, from reputational damage to logistical disruption and the peril of violating sanctions. For many firms disentangling from Russia, a middling market, will do little damage to their broader business. For others, it will be financially painful and logistically difficult.

Many Western businesses find themselves somewhere in between. Their response is similarly middling: a pause rather than a rupture.

UPS and FedEx, two American logistics companies, have suspended deliveries to Russia. CMA CGM, Maersk and MSC, three European shipping giants, said they would not sail there for now. Bain, Boston Consulting Group and McKinsey, three management consultancies, are rethinking their business in Russia, and Boeing is suspending deliveries of parts, maintenance and technical support for Russian airlines that use its aeroplanes.

Companies are also fielding demands from consumers to boycott Russia. Apple stopped selling its products in Russia. Disney and other Hollywood studios said they will delay the release of films on Russian screens, and Google, Meta and Twitter are seeking to limit Russian propaganda on their online platforms.

Some of these moves present quandaries for companies. Any decisions by tech firms in Russia, for instance, may complicate their situation in other controversial markets.

The moral and reputational case for firms to leave Russia will become stronger the longer the war goes on. Leaving, however, may also become financially and logistically harder to do.