A month after the war, these companies are still struggling to leave Russia

Companies have found it increasingly difficult to justify continued operations in Russia, as horrific images of death and despair are seeping out of Ukraine and Western governments are taking steps to further isolate Russia economically.

Chip maker Intel is the latest international company to halt business in Russia, saying in a statement on Wednesday that it was calling for a “rapid return to peace”. On the same day, the White House announced a new package of sanctions banning new investments in Russia by any US party – a move that lawyers said could speed up the departure of many more companies living in the country.

The investment ban comes as more than 600 multinational corporations announced plans to leave Russia voluntarily, making the country less attractive to those companies that intend to stay. At least 155 companies have resisted demands that it stop or downsize while 96 others hold back on new investments or try to buy time, according to Jeffrey Sonnenfeld, a Yale professor who monitors companies’ investments in Russia.

“You do not have to eat at McDonald’s to feel the effects of its closure,” said Aaron Klein, a senior fellow at the Brookings Institution. “For average Russian people, it is a message that they are in danger of returning to Soviet-era society to see Western companies leave Russia.

The United States is increasing sanctions against Russia as questions of effectiveness increase

Intel’s exit comes after more than two decades of business collaboration at a research and development center near Moscow, where a team of engineers would work on advanced tile technology for worldwide use.

The company said it was halting operations there “which will take effect immediately” in response to Moscow’s unprovoked attack on Ukraine’s neighbors, according to a statement on its website on Wednesday. It suspended all shipments to Russia and Belarus on March 3 and has previously issued statements condemning the violence.

“We are working to support all of our employees through this difficult situation, including our 1,200 employees in Russia,” the company wrote in an unsigned statement. “We have also implemented measures of business continuity to minimize disruption to our international operations.

In announcing the new sanctions, the Ministry of Finance also said that it would prevent US banks from settling Russian debt payments in dollars, which would push the country closer to bankruptcy. If early sanctions were intended to sever Russia’s ties with international business, those announced on Wednesday were meant to make that division permanent.

“Today [executive order] will ensure a lasting weakening of Russia’s international competitiveness, “the White House said in a statement issued by the White House on the new measures.

The ban on investment is not clear to many US companies that continue to operate factories and other facilities in Russia. Over time, maintaining these facilities will require some kind of investment, which could force the United States to scrutinize individual corporate decisions, said Ariel Cohen, a senior fellow at the Atlantic Council.

“Is the investment renewing existing production lines? “If you have to replace machine parts, even whole machines, has that been the case with these sanctions?” Cohen asked. “The answer is between the Treasury and the legal interpreters in each case.

Koch Industries, which operates a large glass manufacturing company in Russia, has already halted new investments but has refused to close them.

In a statement emailed on Wednesday, company spokesman David Dziok said Koch would “follow all appropriate sanctions, laws and regulations” regarding its operations and that it would “closely monitor the situation and change our decisions as the case may be” allow.

In an email to staff on March 24, President and Chief Operating Officer Dave Robertson said leaving the glass plants in Russia would “do more harm than good” because it would open the door to prosecution or harassment by Russian authorities. In addition, he added, Moscow would seize the plants and keep them open anyway.

“If [Koch] “If we move away from this glass facility, it would give the Russian government full control over the assets, which we believe would keep them going and achieve 100 percent of the financial benefits,” Robertson wrote.

In the letter, Robertson also said that the company “condemns the outrageous actions of the Russian government in Ukraine.

Some lawyers believe that the Biden government has deliberately misunderstood the definition of “investment” in order to force companies to make their own decisions about how much legal risk they want to take by continuing to operate in Russia. Many companies are likely to be cautious, said David Szakonyi, an associate professor of political science at George Washington University.

“Companies doing business in Russia will have to spend a lot of time and capital to fully understand this new investment rule, which in turn could create enough incentive to withdraw completely from the Russian market to avoid getting into trouble or crossing the line. . Said Szakonyi.

“The Implementing Directive prohibits new investments so that it would not affect existing factories,” the Ministry of Finance said in a statement. “As is standard in the implementation of other construction orders, the Office of the Treasury’s Foreign Assets Inspectorate will issue further official guidelines for the private sector. All companies face different situations and we are in close contact with the private sector to answer individual questions. “

Sonnenfeld said the investment ban would likely have a minimal effect on companies’ long-term plans, as few multinational companies want to seek new Russian investment at this point. Some might try to redefine what constitutes a new investment, as opposed to a capital upgrade designed to sustain existing operations.

The White House continued to grant exemptions to companies that support industries that are important to humanitarian activities, which it identified as including food and agricultural products, medicines and telecommunications services that connect the Russian people to the outside world.

Several US companies mentioned this exemption to justify continued sales there, including Cargill, one of the world’s largest agricultural companies. Last month, it halted all investment in Russia but said it would retain about 2,500 workers there to continue providing “essential food” such as bread, baby mixes and cereals.

For other companies, the decision to withdraw from Russia is complicated due to agreements with business partners. Major US hotel chains, including Hyatt and Hilton, continue to operate third-party hotels in the country.

A Hyatt spokesman said the company was “evaluating new measures and [continues] to evaluate our current agreements with third parties who own Hyatt hotels in Russia. Meg Ryan, a Hilton spokeswoman, said the company would continue to comply with all applicable trade sanctions.

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