Russia Cannot Be Known by the Mind
International and Finnish companies are in a tight spot. Investments in Russia are a problem and companies with significant presence on the Russian markets have seen their stock prices falling. The situation is very difficult. These companies face strong pressure from stakeholders, such as consumer boycotts. More and more have decided to withdraw from Russia for good or seriously consider leaving the country.
At the same time, Russia has started to take strong measures against foreign companies’ plans to shut down production in Russia. There is a risk that foreign companies must sell off their assets and investments at rock-bottom prices. Another risk comes in the form of threat to nationalise businesses. A number of foreign owned companies, some Finnish among them, are of such importance for the Russian economy that they have already been mentioned by the name in the discussions around possible nationalisation. These firms have been operating successfully in Russia for a long time and have invested large sums there. Should they decide to close the doors, Russia’s current leaders or their immediate circle would not miss the opportunity to take over their businesses.
Exiting Russia requires careful consideration and not only because of economic reasons. Companies have concerns over the future of their Russian staff and management after a potential exit. A poorly executed exit may result in the local management facing strict criminal liability due to decisions made by the foreign headquarters.
Available exit options vary depending on the company form, and it is highly unlikely to get full price for a Russian business. On the other hand, if a deal is made at the price of even one rouble, it might be possible to dispute the deal later and invoke investment protection. There is no need to stand by and wait for nationalisation.
When considering the actions to be taken, the management of a company must promote the company’s interests over the long term. This consideration can and should comprehensively address ESG issues.
Over the course of past few weeks, many companies have chosen to withdraw, even though this will cause substantial losses to shareholders over the short term. How many dare to stay? There are arguments pro and con. In any case, companies are faced with a tough decision as good options are scarce.