Western firms are leaving Russia. They must reconsider.
The Russian bear is angry. It is taking its anger out on its peaceful neighbor and relative, punishing Ukrainians for Russian mismanagement. The companies that operate out of the Russian cave are realizing who they are dealing with and are preparing their departure. Some have already snuck out while the bear wasn't looking. The others are now being watched.
Over 450 firms have exited Russia since it began its invasion of Ukraine. Jeffrey Sennenfeld and his team at Yale Chief Executive Leadership Institute at Yale's School of Management have made a list of all the companies that have left the country and add to that list daily. On March 10, Goldman Sachs and JP Morgan announced a full withdrawal of services. On March 8, McDonalds temporarily closed all its locations in Russia. Procter & Gamble has stopped advertising but continues to sell basic products to Russians. Western firms should not leave Russia. Instead, they should suspend operations and pressure the Kremlin to end its war. There are 3 reasons to think that way.
First, firms that comply with Western sanctions have no reason to leave other than social pressure. If firms' operations do not fund the Russian war machine, they have valid reason to stay. If their operations pulls Russian money out of the country, their service is desirable. Only those that violate sanctions, by supplying Russia with technology and funding, should comply with Western governments and leave. Enriching Russian businessmen is equivalent to handing Russia a wad of cash to spend on her favorite toys — tanks and artillery — and greenlight its terror on the Ukrainian people. By carefully choosing who gets the money, the Kremlin can be starved into submission.
Second, firms can use their presence in Russia to fight state propaganda. The Kremlin has already begun erecting an information wall by banning social networking companies like Meta and Twitter. Russian citizens hearing the truth is the last thing Putin wants for his subordinates. Western firms that operate in Russia can force a wedge between state propaganda and its hypnotized viewers. Take YouTube for example. Kremlin-run state media is flooding the website with propaganda about the so-called "special military operation." YouTube has begun marking such videos, citing they are created by Russian state media. Other videos are simply removed from the platform, but not before conspiracy theorists intercept them. The theorists claim that YouTube deleting the video is proof of conspiracy. Their reasoning is understandable.
Free speech should prevail in its fight against censorship. Instead of most videos being removed, they should be allowed to remain. These videos become instant viral hits, while pairing them with credible information to dispute Putin's claims and fact-check the video can be more powerful than seemingly easy censorship. Russian propaganda can be used against itself, to showcase how desperate the Kremlin has gotten. Western firms have an opportunity to change the tide in the war of information and take the lead from the Kremlin.
Third, firms that exit Russia encourage Putin to maintain and even escalate his war on Ukraine. A multinational's exit with no consideration of coming back marks a point of no return. Putin can continue his war with no more left to lose. Russia's economy is already in tatters; how much worse can it get? If a Western multinational, instead, suspends operations but promises to resume if Putin ends his war, he may be inclined to consider that offer. He knows he is losing his grip on the Russian public and he can only blame the miserable conditions on the West for so long. Soon, Russians will have no one else to blame for their misfortune but Putin himself. Knowing that his ego is at stake, Putin may consider escalation, but a route to spare his pride allows Putin to weasel out safely. Being labeled a weasel is favorable to being labeled a war criminal. Western firms should use their pressure on Putin and force his hand, rather than abandon the fight altogether.
Nonetheless, Russia is on its way to reform the Soviet Union, repression is increasing, the ruble is worth pennies, and trade is plummeting. The Kremlin is also threatening Western firms directly. A plan endorsed by Putin on March 10 would allow Russia's government to nationalize operations of departing Western firms and seize their assets. Firms that have already left dodged a bullet; those still there must play nice or risk being bullied.
Russian firms are in danger as well. Increased repression at home means all Russians, including the ones with clout. Dissenters are detained or imprisoned indefinitely. Russian news networks that don't promote Putin's lies are being shut off. Russian executives are quitting their jobs and fleeing the country altogether. Those that stay condemn the invasion in private. The hit to profits is preferrable to a sentence in a gulag.
This may explain why Western firms are leaving preemptively. Rather than ceding to social pressure, they are evaluating the risks and letting profits take the hit. No decision comes without risks, however. If Western firms choose to pressure the Kremlin collectively, the gains may be greater than the losses. Their demands may be received clearer by Putin that the demands of his own people.
"Cease the war or we leave" is a much better slogan than "Cease the war after we leave"
Russia's war on Ukraine may last weeks or years. Western multinationals in Russia have much to consider and many decisions to make. Whether it's the threat of supply chains disruptions, social pressure, or risk aversion, firms must tread lightly. The Russian bear is getting angrier every day. If all the firms leave, they risk making the bear hungry as well. A bear that is angry and hungry is far more dangerous.
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