Russian prosecutors have issued warnings to Western companies in Russia, threatening to arrest corporate leaders who criticize the government or seize the assets of companies that withdraw from the country, according to people familiar with the matter.
Russian President Vladimir Putin last week expressed his support for a law to nationalize the assets of foreign companies that leave his country due to the invasion of Ukraine. Prosecutors’ warnings were aimed at companies in all sectors, including technology, food, apparel and banking, people familiar with the matter said.
Since Russia invaded Ukraine in late February, the United States and allied countries have imposed heavy sanctions on Russia. The WSJ’s Shelby Holliday dives into how these sanctions are affecting everyone from President Vladimir Putin to ordinary Russian citizens. Photo: Pavel Golovkin/Associated Press
The warnings have prompted at least one of the attacked companies to limit communications between its Russian business and the rest of the company, fearing emails or text messages between colleagues could be intercepted, some people said.
Other companies have moved to transfer executives out of Russia, other people familiar with the matter said.
Spokespersons for Coca-Cola, IBM, P&G PG -1.19%
and McDonald’s declined to comment. A Yum spokeswoman declined to comment beyond the restaurant company’s earlier statements about its decision to halt operations at its KFC and Pizza Hut restaurants in Russia.
KFC operating in a Russian mall on Saturday.
Photo:
Maxim Konstantinov / Zuma Press
On Sunday night, after this article was posted online, the Russian embassy in Washington retweeted it with a red tag reading “FAKE NEWS.” “The decision to continue doing business in our country is entirely up to Americans,” he tweeted. “As well as the right to ignore the Russophobic hysteria that encourages foreign companies to suffer huge losses to hit Russia.”
A parade of companies have announced plans to suspend or scale back operations in Russia in the wake of Putin’s invasion of Ukraine and sanctions imposed by Western governments.
Many companies, particularly retailers and manufacturers, have said their decisions to halt operations are temporary. Some said they were necessary because of the disruption sanctions have had on supply chains. Others have vowed to leave forever.
Companies are also evaluating their business in Russia differently given economic instability and expectations that conditions will be volatile for some time, according to people briefed on the matter. Despite warnings from prosecutors, several companies do not plan to change their decisions to withdraw or suspend operations, the people said. It would also be difficult for companies to smoothly transfer operations to Russia if the government tried to impose its own managers, one of the people said.
Russia’s prosecutor general’s office said on Friday it would ensure that companies that have said they are pausing or exiting operations comply with the country’s labor laws. More than 350 foreign companies have said they will leave or temporarily suspend work in Russia, according to the Yale School of Management.
Wall Street banks like Goldman Sachs Group INC.,
consumer goods companies like Coca-Cola, retailers like Levi Strauss & Co., and tech giants like Apple INC.
have announced plans to retire. Energy giants like BP PLC and Exxon Mobil corporation
said it would abandon Russian operations.
Putin backed a plan unveiled last week by a senior member of his dominant United Russia party to nationalize the operations of Western companies leaving the country. Such a move would help prevent job losses and maintain Russia’s ability to produce goods domestically, said Andrei Turchak, secretary of the general council of the United Russia party.
Washington warned against a nationalization effort.
“Any illegal decision by Russia to seize the assets of these companies will ultimately result in even greater economic pain for Russia” and could invite legal action, White House press secretary Jen Psaki tweeted Thursday.
Coca-Cola said last week that it would suspend operations in Russia. Coca-Cola’s business in Russia and Ukraine contributed about 1% to 2% of its operating income and revenue in 2021. The company had about a 21% stake in Coca-Cola HBC AG
Coca-Cola bottling and distribution partner in the region, as of December 31.
Restaurant owner Yum said last week that it was temporarily closing its 70 company-owned KFC locations and signing an agreement with its Pizza Hut franchise to halt business at all 50 of its locations. He has also suspended all investment and development of restaurants in Russia, the company said.
The company is “focused on the safety of our people in the region and will continue to support our teams in Ukraine as it assesses ways Yum Brands can make a positive impact in the region,” the spokeswoman said.
IBM Chairman and CEO Arvind Krishna wrote in a blog post last week that the company had suspended all business in Russia. “The safety of IBM employees and their families in all areas affected by this crisis remains our top priority,” he wrote.
McDonald’s said last week that it would temporarily close its roughly 850 restaurants in the country and continue to pay the 62,000 people it employs in Russia. The company said it could not yet determine when it might reopen restaurants in Russia and would consider whether additional steps would be required.
Closing the restaurants is expected to cost the company an estimated $50 million a month in payroll, leases, supply chain and other costs, McDonald’s said.
P&G, maker of Pampers diapers and Crest toothpaste, said it would stop spending in Russia on capital investment, advertising and promotions and sell only products that focus on basic health, hygiene and personal care. P&G said Russia and Ukraine combined account for less than 2% of annual revenue. The company said it employs 2,500 people in Russia.
—Sharon Terlep contributed to this article.
write to Jennifer Maloney at [email protected], Emily Glazer at [email protected], and Heather Haddon at [email protected]
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