War in Ukraine: continue your activity, stop investing, leave the country... Four questions on the reactions of French companies in Russia

Faced with the conflict raging in Ukraine, French companies are in the midst of a dilemma. So far, few of them have chosen to completely halt their activity on Russian soil.

War in Ukraine: continue your activity, stop investing, leave the country... Four questions on the reactions of French companies in Russia
A Danone-Unimilk factory in Lyubuchany, Moscow region (Russia), August 9, 2011. (ALEXEY KUDENKO / SPUTNIK / AFP)

Stay or go? A week after the invasion of Ukraine by Russian troops, French companies established in Russia must choose whether or not to continue their activity, despite the supply problems caused by the war, the sanctions imposed by the West on Moscow and the risk to their image. A particularly complicated dilemma when France is the first foreign employer  in the country and  the second provider of foreign direct investment . 

In fact, while many multinationals have announced their withdrawal from Russia, the movement is still little followed by French companies. Franceinfo summarizes the situation for you in four questions.


1 Why does the question of a cessation of activity arise?

The Russian invasion in Ukraine first posed logistical problems for businesses. The Swedish furniture group Ikea has thus announced the suspension of all its activities in the country and in its Belarusian neighbor due to “serious disruptions in the production and trade chain”.

In certain sectors such as aviation and finance, the economic sanctions taken against Russia are also forcing a reduction in operations. Faced with the ban imposed by Canada and the European Union on the export of aircraft, parts and equipment from the aeronautical industry to Russia, Airbus has had to suspend its assistance services to Russian airlines as well as the supply spare parts. In addition, the existence of the sanctions poses the risk of no longer being able to "repatriate the profits to (...) the headquarters, since the money is deposited in the account of a Russian bank and that gradually, [the banks ] are cut off from the international banking system" , advance to Ouest-France Estelle Brack, chief economist and founder of KiraliT, a strategic business consulting firm.

Finally, the continuation of the activity in Russia also raises the question of the social responsibility of the groups, some of them taking the initiative to preserve their reputation. "Doing business with Russia will become less and less politically correct and reasonable. On the contrary, the risk in terms of reputation amplifies beyond the geopolitical risk linked to the conflict and the economic risk linked to the sanctions" , notes to from AFP Sylvie Matelly, Deputy Director of the Institute of International and Strategic Relations (Iris). The Ukrainian government did not hesitate to directly challenge  large Western companies, such as Apple, via social networks  , asking them to cut ties with Moscow.


2 What difficulties are faced by companies wishing to leave Russia?

However, ceasing its activity in Russia for a company established there is "very difficult" , summarizes Guntram Wolff, director of the Brussels think tank Bruegel, to AFP. "The Russian Central Bank prohibits the sale of financial assets and (...) even if these sales were authorized, the ruble has lost its value so much that the losses would be enormous" , he puts forward.

“For a lot of companies, the question of exiting does not arise, they are stuck because they have significant holdings and assets in Russia which are not 'liquid' at all” , such as production sites which they do not cannot close or resell “overnight” , adds Sébastien Jean, director of the Center for Prospective Studies and International Information (Cepii). Foreign companies in Russia are also wondering about "what the sanctions will be in return from the Russians. Many may fear seizures of some of their assets or expropriations", emphasizes Sébastien Jean. Finally, leaving would amount to leaving an opening on the market for potential competitors less hampered by the moral dilemma posed by the Russian invasion, which would weaken activity in the long term.


3 What does France advise French companies?

If the Minister of the Economy, Bruno Le Maire, now sees  "a problem of principle"  in the fact that companies work with those close to the Russian authorities, he has not however called on French groups to leave the country. By way of comparison, British Business Minister Kwasi Kwarteng said on Twitter  on Monday that "there was a strong moral imperative for British business to isolate Russia".

In the government, the message is rather "to support" the companies exposed to the repercussions of the conflict and the sanctions imposed on Russia, affirmed the Minister Delegate in charge of Foreign Trade, Franck Riester, on March 1, at the end of a meeting with around sixty companies and professional federations. During this meeting,  "the government did not ask companies to stop their activities in Russia, but its representatives asked if some were considering" actions, according to a participant quoted by AFP.

During a meeting on March 4 between Emmanuel Macron, certain ministers and heads of large companies, "Bruno Le Maire indicated that it seemed more reasonable to put his activities on hold during the crisis, rather than to leave hastily. the country, unilaterally and without warning anyone" , also reported a participant quoted by Le Figaro  (article reserved for subscribers) .


4 What are French companies doing?

A week after the outbreak of the Russian invasion in Ukraine, many multinationals have distanced themselves from Russia, such as BP, Shell, Disney, Volvo, Microsoft or Meta. But few large French companies have announced their intention to temporarily stop their activity in Russia, and none permanently.

Air France thus announced at the end of February the suspension of "the service and  [the] overflight of Russia"  until further notice, "given the situation in the region". The shipowner CMA CGM has also declared that it would stop serving Russian ports, again more "for the sake of security" than economic retaliation.

The subsidiary of the Renault-Nissan Avtovaz group, the leading car producer in Russia, which employs tens of thousands of people, has also announced that it will temporarily shut down two of its factories due to a shortage of imported components. 

lFor its part, the French luxury group Hermès said on Friday that it was "very concerned about the current situation in Europe"  and decided to "temporarily close" its stores in Russia. In the process, the world number one in luxury LVMH, its competitor Kering and the Chanel house made similar decisions. The Michelin Guide, which for the first time awarded 69 tables in Moscow in October, has also announced that it will suspend any recommendation in Russia in view of the events.   

But many other French companies present in Russia did not make an announcement or communicated that they were continuing their activity. This is the case of Danone, which said on Sunday that it was continuing its activities in the country  "in order to meet the essential food needs of the civilian populations" . The French agrifood group, which generates 5% of its income and employs 8,000 people in Russia, nevertheless specified that it was suspending all investment in this country for the time being. Similarly, its competitor Lactalis has indicated that  " [its] sites in Russia continue to produce and  [its] products to be marketed" , ensuring "government arrangements regarding the situation in the country ," reports France Bleu .

Societe Generale, present in Russia via its subsidiary Rosbank, also announced in a press release that it would continue its activity  "with the greatest caution and selectivity" , while its activities in the country represented just under 3% of net income. of the group in 2021. TotalEnergies, which generates 3% to 5% of its total income in Russia, has meanwhile indicated that it "will no longer provide capital to new projects" in the country, without mentioning a withdrawal .

Post a Comment

© CNEWS - Latest World News. All rights reserved. Distributed by ASThemesWorld