What happened to foreign companies operating in Russia before war: first-time study

For the first time, the Kyiv School of Economics (KSE) has analysed the state of affairs of foreign companies that operated in Russia before the war and later stayed or left Russia – their income, capital, assets, net profit, etc.

Source: KSE

Details: According to the study, as of June 2023, 7.3% of foreign companies had completely withdrawn from Russia after the start of the full-scale invasion of Ukraine. About 36.4% of foreign companies announced their withdrawal from the Russian market or suspended their operations. 15.6% are waiting it out. 40.7% are still operating in the country.

Quantitatively, this picture looks as follows:

• 241 foreign companies have completed their withdrawal from Russia.
• 1,704 foreign companies have already partially reduced, suspended or terminated their operations in Russia: 1,193 have cut their Russian operations and 511 foreign companies are "waiting it out" – they have reduced their current operations and suspended new ones.
• 1,336 foreign companies continue to operate in Russia.

Since the beginning of the Russian invasion of Ukraine, the percentage of companies winding down operations in Russia has been growing sharply until mid-April 2022, but over the past nine months, the ratio of those leaving or staying has remained virtually unchanged.

In 2021, companies that have already completely withdrawn from Russia had at least 409,500 employees, $59.8 billion in annual revenue, $27.4 billion in capital and $51.3 billion in assets.

The companies that announced their withdrawal from Russia had 256,000 employees, $46.7 billion in annual revenue, $18.2 billion in capital and $19.5 billion in assets.

The companies that suspended their operations in the Russian market employed 110,600 people, had annual revenues of $34.5 billion, $39.6 billion in capital and $100.9 billion in assets.

The impact on the Russian economy of only 241 companies that have already completely withdrawn from the Russian market cannot be underestimated, as in 2021 they employed 28.7% of the staff employed by foreign companies, and the companies owned about 17.8% of assets, 15.7% of the capital invested by foreign companies in the country, and in 2021 they generated revenues of $59.8 billion or 19.7% of total revenues and paid $3.7 billion in taxes or 14.8% of the total taxes paid by the observed companies.

At the same time, the picture is quite different for those who remain – 45% of companies represent 32.5% of revenue, and 16% of companies that are waiting represent 21% of revenue generated in Russia.

Quote: "The conclusion could be that smaller companies with lower revenue prefer to stay and those who have higher revenue are more eager to wait, limiting their investments as an excuse (at the same time they continue to earn and reinvest their local profit)."

More details: Companies that completely withdrew from Russia were able to generate 2.6% less revenue in 2022 (17.1% of the total) than in 2021 (19.7% of the total, which is understandable as most of them left the country before the end of the year).

Companies with a "waiting" status received almost the same share (-2.6%) of revenue in 2022 (18.5% of the total) compared to 21.1% of the total in 2021.

Exiting companies also received significantly less (-7.7%) revenue in 2022 (19.0% of the total) than in 2021 (26.7% of the total).

Also, the group of companies with the "exiting" status is the only one that became unprofitable in terms of net profit/loss in 2022.

At the same time, the remaining companies were able to generate significantly higher (+12.9%) revenue in 2022 (45.4% of the total) than in 2021 (32.5% of the total).

Quote: "So the key conclusion is that money matters for those companies who are still tied with its local business in Russia."

Background:

Since the first days of the full-scale war, Jeffrey Sonnenfeld, a professor and founder of the Yale University Executive Leadership Institute, has been following companies that have worked/are working in Russia with a team of experts and students. More information about the results of this work is available here.

Journalists fight on their own frontline. Support Ukrainska Pravda or become our patron!