New study: Only nine percent leave the country: Russia has Western companies firmly under control

This article first appeared on ntv.

New study: Only nine percent leave the country: Russia has Western companies firmly under control

This article first appeared on ntv.de

There are some well-known cases: Opel's parent company Stellantis stops production in Russia, IKEA no longer imports or exports goods to Russia, McDonalds has completely withdrawn from Russia. At the start of the Russian war of aggression in Ukraine almost a year ago, many Western companies announced their withdrawal from Russia. However, a new study by the renowned University of St. Gallen shows that far fewer companies have actually completed their exit than previously thought. In total, it is less than nine percent.

According to the study, as of April 2022, a total of 2405 subsidiaries of 1404 EU and G7 companies were operating in Russia. These figures come from the ORBIS database, which contains information on more than 400 million companies worldwide. By November 2022, 120 (8.5 percent) of these companies had withdrawn at least one subsidiary from Russia entirely.

Of these 120 companies, the majority - a quarter - are headquartered in the United States. 12.5 percent come from Finland and 10.8 percent from the United Kingdom. Germany is in fourth place with 11.7 percent. The situation is different for the companies that are still active in Russia. According to the study, 19.5 percent of the 1,284 companies still active in Russia have their headquarters in Germany. 12.4 percent of the companies still based in Russia come from the USA.

"We were skeptical about the number of companies from Europe and the G-7 countries that have left Russia," says Simon Evenett, an expert on trade policy at the University of St. Gallen, in an interview with the "Süddeutsche Zeitung". "Then we analyzed based on data - and looked at where locations and company subsidiaries were really sold. And in very many cases we didn't see any real withdrawal from Russia."

The 8.5 percent does not represent the lion's share of Western investment in Russia, either. The firms that withdrew accounted for 6.5 percent of total gross profit and 15.3 percent of the workforce of all EU and G7 firms with active operations Russia business. "These results suggest that the exiting Western firms had, on average, lower profitability and larger workforces," the research team writes in the study.

The researchers are trying to find an initial explanation for the low rate in the study. On the one hand, some companies may be exempt from official sanctions and therefore have no incentive to stop doing business in Russia. In addition, it may be difficult to find a buyer for the subsidiary at a reasonable price. Or the Russian government could prevent and delay the sale.

The sanctions, the public pressure and the increasing demarcation from Russia appear to be having less of an impact on economic cooperation than Western governments had previously hoped. The researchers point out that a withdrawal from China - should there be an attack on Taiwan - is likely to be much more difficult. For every US dollar of foreign direct investment in Russia, almost 8 dollars are invested in China.

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