Western companies should have begun pulling out of Russia the moment its tanks entered Ukraine.
BEN MARLOW CHIEF CITY COMMENTATOR July 2023 •
Danone or Dan-owned? Time for a name change at one of France’s largest companies after the Kremlin seized control of its Russian operations.
The descent of Vladimir Putin’s regime into gangster territory is complete. This is the behaviour of a rogue state – one that hasn’t just given up any pretence of being part of the international system, but presumably also any ambitions about being accepted back into it if and when its war against Ukraine ends.
Enforced nationalisation of foreign assets is state-sponsored theft. Moscow has taken over Carlsberg’s Russian unit as well. These are not inconsequential businesses. Danone is the largest producer of dairy products in the country. Carlsberg controls a third of the beer market.
The brewer said it was assessing the legal and operational consequences as well as any financial impact. Danone said it is “preparing to take all necessary measures to protect its rights as shareholder”.
Still, there will be little sympathy for those that are being betrayed by an increasingly desperate Kremlin. Many are paying the price for attempting to get away with a “business as usual” approach to affairs by turning a blind eye to Putin’s cruelty.
The moment that Russian tanks breached Ukraine’s borders was the moment that Western companies should have begun pulling out of Russia. Many did – Yale University professor Jeffrey Sonnenfeld has kept a meticulous “who’s who” list of those that did the right thing and quickly exited. It’s now in the many hundreds.
Yet, there are scores of others that shamefully chose to stick around, many on the basis of spurious claims of providing ordinary Russians caught up in the war with vital goods and services.
It is along these laughable lines that FTSE 100 titan Unilever continues to sell Magnum ice-creams to the country’s 144 million-strong population while Putin carries out war crimes against Ukrainian civilians and soldiers with impunity.
Danone’s righteous gymnastics were no less contrived. Boss Antoine de Saint-Affrique thought he could kid the world into believing that it was staying in Russia out of “a responsibility to the people we feed, the farmers who provide us with milk and the tens of thousands of people who depend on us”.
It was a bizarre statement that captured the knots that Western business leaders tie themselves in when presented with a moral judgement entirely at odds with their pursuit of profit. Danone isn’t an NGO or food charity that could justify remaining in Russia because it has a duty to prevent people from starving, or to support struggling farmers.
Nor is the consumption of yoghurt or other mass-produced dairy foods such a fundamental human right that Danone has an obligation to continue selling its goods in the face of Putin’s brazen war-mongering.
Danone’s excuses were nothing more than that – a cynical cover to keep the tills rolling and avoid having to walk away from a business that had become an important outpost in its global empire. Around 6pc of Danone’s €24bn (£20bn) annual turnover was generated in Russia prior to the invasion.
Kellogg, Kraft-Heinz, Mars and Pepsico tried the same argument yet it is hard to think of a single product that any of those food giants make that could genuinely be considered essential to people’s lives.
Nestlé quickly gave up pretending that Cheerios cereal and Nescafé could be categorised as “important food” after being publicly named and shamed by Ukrainian president Volodymyr Zelensky, although it continued selling baby food and food to hospitals.
Danone and Carlsberg have flip-flopped too. Last October, the former announced an exit but only of-sorts. Any credibility it might have received for its willingness to take a €1bn write down on a planned sale of its Russian subsidiary was immediately overshadowed by the news that it intended to keep 25pc of shares and maintain a seat on the board of directors. It was a departure in name-only.
Carlsberg was equally unconvincing, with the Danish brewer only finding a buyer for its assets in June – nearly 18 months after the invasion.
In the end, the plans of both companies were overtaken by events. Despite Carlsberg calling the Kremlin’s decision “unexpected”, the signing of a decree in April by Putin allowing it to take “temporary” state control over the assets of companies or individuals from states deemed “unfriendly” meant Moscow’s asset grab was entirely foreseeable.
True, the regime has imposed some tough restrictions that make an exit more complex: companies on the unfriendly list are only allowed to sell their Russian assets for a maximum of half their value; they must also make a “voluntary contribution” to Russia’s war chest of 5-10pc of the sale price; and deals must be government-sanctioned.
But none of that stops companies that are serious about getting out from doing so – they can simply choose to hand over the keys and walk away.
If that sounds like a difficult decision to take then consider the words of White House press secretary Jen Psaki: “Think about where you want to stand when the history books are written. Support for the Russian leadership is support for an invasion that is…devastating.” Or those of Zelensky himself, who has accused Western companies of “sponsoring the Russian war machine”.
Every Western company that is still in Russia has helped to undermine Ukraine’s fight and handed an important victory to Putin. And yet, this is how their faith is repaid. It is the cost of staying in bed with tyrants.