Currently, the only immediate way to punish Putin for the invasion of Ukraine is through radical and comprehensive economic sanctions against Russia. Hundreds of foreign companies have withdrawn from or suspended operations in this market. However, not all of them – and some have even decided to take advantage of the situation by taking over empty niches. The Warsaw Enterprise Institute is of the opinion that this situation is unacceptable, as it reduces the effectiveness of sanctions, giving Putin the resources to finance his war effort. For this reason, action should be taken at EU level to force private entities to respect the sanctions.
Ukraine is suffering. Putin is taking Ukrainian lives as well as property. The value of the war damage is already estimated at around 500 billion dollars. As the European Business Asssociation reports, only 13 percent of Ukraine’s small businesses are functioning relatively normally – the rest have either collapsed or been suspended. Unfortunately, the only possible way to counter Putin’s aggression is to rearm the Ukrainian army and impose sanctions on the Russian economy and its oligarchic elite. An important element of these sanctions is not only the top-down blockade of trade with Russia and capital flows, but also the bottom-up actions of multinational companies that have hitherto operated within Russia. Coca-Cola, McDonald’s and Starbucks are just three of the hundreds of companies which, under public pressure, have decided to suspend their operations in this country.
However, there is still a large group of companies which do not intend to withdraw from Russia, and in some cases are even expanding their operations there, taking up the positions vacated by their recent competitors. Such companies include Auchan, Bosch, LG, Decathlon, Leroy Merlin, Oriflame, Pirelli and Subway. The simple greed and lack of fundamental moral instincts of the managers of these businesses is usually rationalised in several ways. It is said, for example, that it is about ensuring that ‘ordinary’ Russians have their basic needs met. The problem is that, according to the most recent polls, as many as 70% of Russians support Putin, so hitting them with sanctions is justified, and the rest – those opposed to the war – are aware that sanctions are necessary and the only way to weaken Putin. It is pointed out that sometimes franchise operations or a complicated ownership structure prevent a top-down response, but this sounds like a typical formal excuse. Some companies insist that they are supporting Ukraine, in a way balancing their activities in Russia – but this is a “candle to God and a candle to the devil” strategy because by maintaining operations in Russia, they are de facto financing the regime. Finally, it is argued that the reason for staying in Ukraine is to protect workers who might be laid off if operations were shut down or suspended, but this argument can be refuted in the same way as the first one about concern for ordinary citizens.
The companies remaining in Russia are exploiting an unfair competitive advantage. The only advantage here is unscrupulousness. We call for the implementation of provisions at EU level that will make opportunists rethink their actions. For a start, let us create and make public lists of “businesses without conscience” at the level of each country. Customer pressure will be stronger – as Coca-Cola shows – than any regulation.
Economic sanctions against Russia can only be effective if they are severe and long-lasting, making even those who support Putin forget their ideology, seeking the quickest way to shorten the anguish. Leaky sanctions that Putin’s regime can mitigate by cooperating with “companies without conscience” will only strengthen the power of this autocrat.