Trading with the Enemy
Newsweek Europe|August 15, 2022
Many Western companies are either stepping back from Russia or leaving altogether. The costs have been high both for business help end the war in Ukraine? and Russia. Will "self-sanctioning"
DAVID BRENNAN
Trading with the Enemy

IMMEDIATELY FOLLOWING RUSSIA'S INVASION of Ukraine on February 24, a relative handful of foreign-based companies announced they would be leaving Russia. Jeffrey Sonnenfeld, a Yale School of Management professor who is tracking the companies that have left and the ones that are staying, estimates the original number at "several dozen."

Since then, as international revulsion at the war has grown, more than 1,000 companies from around the world have disengaged to varying degrees from Russia.

If the moral case against President Vladimir Putin's attack on his neighbor is undeniable, the business arguments for and against pulling out of Russia can be more complicated. For any company, leaving Russia is complex and time-consuming. And the question of what actually constitutes leaving-sell everything? close temporarily?-can get murky. Not to mention expensive: Shell Oil has said its decision to leave joint ventures with Russian state-owned energy giant Gazprom would cut its quarterly profit by $4-5 billion. J.P. Morgan Chase expects to lose around $1 billion from scaling down its Russia operations. McDonald's is looking at a write-off of up to $1.4 billion for its exit.

Will the growing number of businesses departing Russia, due to either official government trade restrictions or via voluntary "self-sanctioning," cause enough pain to end Putin's war in Ukraine? And at what cost to the Russian economy and the world's?

Yale's Sonnenfeld says self-sanctioning is a more potent weapon than government sanctions, despite the increasing use of the latter by the U.S., even before the Ukraine conflict. According to the Treasury Department, after 9/11 sanctions became "a tool of first resort to address a range of threats to the national security, foreign policy, and economy of the United States." (The U.S. currently has 37 sanctions programs in place around the world.)

This story is from the August 15, 2022 edition of Newsweek Europe.

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This story is from the August 15, 2022 edition of Newsweek Europe.

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