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Following the collapse of the Soviet Union, Russia began rebuilding its relationships with the global community. Foreign companies eagerly entered the Russian market, while Russian businesses sought to establish themselves internationally, both independently and as part of global value chains. However, the ongoing conflict between Russia and Ukraine, which first began in 2014 and escalated into a full-scale war in 2022, drastically changed the dynamics. Many Western companies withdrew from the Russian market, yet some remained. So, how do these companies continue their operations in Russia?
Russia's Role in the Global Economy
In response to the annexation of Crimea and the conflict in Eastern Ukraine in 2014, Western nations imposed sanctions on Russia. At that time, several foreign companies were forced to rethink their strategies regarding their presence in the Russian market or their partnerships with Russian entities. The West’s concerns were primarily focused on Russia's military-industrial complex and companies operating in Crimea or other contested areas of Ukraine. However, the notion of a complete exodus of major international businesses from Russia had not yet materialized. The situation took a sharp turn after the full-scale invasion in February 2022.
Russia's economy is one of the largest in the world and the dominant one in its region. With a nominal GDP of $2.1 trillion, Russia accounts for only about 2% of the global economy. By comparison, the U.S. makes up 26%, China 17%, and the EU 18%. Some individual European countries, such as Germany (GDP of $4.6 trillion), France ($3.1 trillion), and Italy ($2.3 trillion), surpass Russia's contribution to the world economy. However, Russia’s importance increases when purchasing power parity is considered. In this case, Russia moves up to the 6th position globally according to the IMF or even 4th according to the World Bank.
While Russia plays a significant role, it is not decisive on the global stage. For many foreign companies, especially those from the West, the Russian market has remained attractive but not crucial to their survival. The loss of the Russian market is a setback, but it is not catastrophic for most international businesses.
The strength of Russia's economy lies primarily in its natural resources and a few critical industrial sectors that are vital to the global economy. This includes the supply of gas, oil, coal, nickel, potash fertilizers, platinum, aluminum, grain, and sunflower oil. Any abrupt disruption in the flow of these commodities from Russia could trigger economic turmoil and potentially a global crisis. Additionally, Russia supplies rare or hard-to-replace resources like palladium and uranium, which even the U.S. continues to purchase.
The energy standoff between Europe and Russia highlighted many nations' critical vulnerability to Russian supplies. As a result, countries are now working to diversify their supply chains to reduce their dependence on Russian resources. This naturally diminishes the presence of foreign companies in Russia, but it does not eliminate it entirely. For example, China continues to benefit from expanding gas cooperation with Russia but is also cautious about diversifying its energy sources to maintain strong negotiating leverage in future dealings with Moscow. China has also taken advantage of the departure of many Western companies from the Russian market, but not all have left.
While the war and sanctions have driven many foreign businesses out of Russia, the country’s economic significance, particularly in the energy and resource sectors, means that some companies still find it profitable or strategically important to maintain a presence there. For those that remain, navigating sanctions and reputational risks has become a balancing act, but the incentives are strong enough to keep them in the game.
The Golden Cage with an Open Window
Since 2021, the number of foreign-owned legal entities in Russia has decreased by a third. However, this decline is only partially due to companies directly exiting the market. Factors such as re-registration and the cleansing of Russia's corporate registry from offshore entities also contributed to this reduction. Nonetheless, it is clear that a significant number of companies left Russia directly after its invasion of Ukraine in February 2022.
These companies exited at different times and for various reasons. Reuters estimated the losses of those who left Russia at $107 billion. According to Yale University, which monitors the exodus of foreign firms, the majority were American (32%), followed by British (10.6%), German (7.8%), Finnish (4.8%), and Japanese (4.7%) companies.
Small foreign firms, especially those operating via outsourcing, found it relatively easy to exit without major losses. However, for large companies with significant assets in Russia, the process proved more difficult. Russian authorities, aiming to minimize economic damage, imposed obstacles such as restricting dividend payments and requiring companies to sell their assets at discounts of up to 50%. Despite this, some major corporations, particularly those with consumer-facing businesses, chose to leave, even at great financial loss. McDonald’s, IKEA, and many leading Western automotive brands were among the first to exit.
While most global companies honored their commitments to withdraw from Russia, some have seemingly reversed their initial decisions. The foreign companies that remain span various sectors, including retail, industry and finance.
Among the consumer goods giants still operating in Russia are Unilever, Nestlé, Mondelēz, and Procter & Gamble. Each company cites different reasons for staying, from concerns for employees and their families to obligations toward local partners. For example, Unilever paid $42 million in taxes to Russia in 2022, with the company’s Russian subsidiary doubling its profits that year.
Nestlé has also maintained its presence, though it reduced the range of products sold in Russia. Similarly, the German chocolate maker Ritter Sport continues to operate in the country. Andreas Ronken, Ritter Sport's CEO, explained in an interview that "children in Russia love chocolate too," noting that Russia is the company’s second-largest market.
One of the most debated cases is Raiffeisen Bank, an Austrian financial institution. Despite mounting pressure from European regulators to scale back operations, the bank only began significantly reducing its business in Russia in late 2024. In 2022, Raiffeisen’s Russian subsidiary generated more than half of the group’s total net profit, about €2 billion, driven by strong growth in net fees from money transfers and foreign exchange transactions. In 2023, its Russian division accounted for 56% of the bank’s consolidated net profit, €1.3 billion of the group’s total €2.4 billion. Raiffeisen’s decision to leave accelerated after receiving a letter from U.S. Deputy Treasury Secretary Wally Adeyemo, warning that the bank could lose access to the U.S. financial system due to its operations in Russia.
Other companies that continue to operate in Russia include Bayer AG, Metro Cash & Carry, and Philip Morris. These and similar firms hold billions of dollars in assets in the country. The cases of Danone and Carlsberg, whose assets were effectively nationalized by Russian authorities, serve as a warning to other foreign asset owners, deterring them from rushing to exit the market. For those that remain, the Russian market, now void of many global brands and with rising consumer income, may seem increasingly attractive—if they can overlook reputational risks and the threat of secondary sanctions from the U.S. and EU.
Ethics vs. Economics
The strategy of companies that remain on the Russian market involves both an economic and ethical dilemma. From an economic perspective, Russia remains highly attractive. As long as the government continues to inject money into the economy, sustaining high income levels and domestic demand, the market will stay appealing. However, since Russia is not a critical market for most foreign businesses, they will likely seek to exit as the costs of remaining rise due to expanding sanctions and the risk of secondary sanctions.
From an ethical standpoint, the decision to stay in or leave Russia seems clear. The problem lies in the fact that the global economy operates more on economic principles than ethical ones. As a result, many foreign companies still operating in Russia will likely adopt a survival strategy. They will try to avoid making abrupt changes to their Russian operations, slow down their exit process as much as possible, or wait until the conflict between Russia and Ukraine is resolved before making any major decisions.
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