‘Pretty Complicated’
Cigarette maker Philip Morris International Inc. also has spoken out about departure problems. The company’s CEO Jacek Olczak told Bloomberg Television in July that the company’s exit is “a pretty complicated process” that would take several more months. Olczak referenced the pressure of meeting the expectations of stakeholders including employees, shareholders and government regulators. He also spoke about the complexity of operating conditions in Russia.
Dutch telecom company Veon also has had a lengthy departure. The Russian government reportedly didn’t approve its sale of its Russian arm Vimpelcom until last week. Veon said it concluded a deal
to sell its Russian mobile network towers in December.
Ford Motor Co. sold its 49% stake
in its joint venture with the Russian manufacturer Sollers in October. The move finalized Ford’s exit from Russia after the company suspended its operations earlier last year. But the company also said at the time that it will retain the option to buy back the shares within a five-year period “should the global situation change.”
The report form the Swiss professors said such buy-back clauses have been part of similar Russian divestment deals involving companies such as McDonald’s and Nissan Motor Co.
Steven Tian, director of research for the Yale Chief Executive Leadership Institute who works alongside Sonnenfeld, said that repurchase options are common in divestments and asset sales.
“Until a company has actually shown any interest in re-buying their operations, which none have, this diversionary red herring should not distract from the fact these companies have fully exited Russia,” he said.
Still Here
Companies which have left Russia often divulged the risks that prompted their departure. French industrial company Legrand SA, for example,
said last month that it decided to divest its Russian operations “in view of recent developments, including rising operational complexity and uncertainty.”
Scores of others, including US-based restaurant chains Sbarro, LLC and TGI Fridays, for example, still have an ongoing presence in the country.
TGI Fridays issued a statement shortly after the war began that any exit plans from Russia would be made by local, independent franchisees.
But for those companies that do stay, it’s not quite business as usual.
“It’s still possible to do so but it is extremely complex legally speaking,” Mosman said. Companies that are still willing to “thread that needle” have the headache of ensuring compliance with a litany of mounting Western sanctions and export controls on Russia, she said.
The sprawling range of sanctions and export controls issued by the US and EU restrict transactions with Russia’s Central Bank, imports of Russian oil and other energy products, imports of raw materials, gold and seafood, and a host of export controls on sectors including defense, technology and aerospace—to name a few.
Some banks aren’t willing to take the risk of facilitating any corporate financial transactions connected to the country, said Terry Gilroy, a partner at Baker McKenzie who previously headed Barclays’ financial crime legal team. Banking options in Russia for Western companies “are becoming more and more limited,” he said.
As the practical difficulties in operating a subsidiary in Russia take hold, Gilroy said some companies feel like they’re “jumping through hoops and spending a lot of money on compliance.”
To contact the reporter on this story: Clara Hudson in Washington at
chudson@bloombergindustry.com
To contact the editors responsible for this story: Jeff Harrington at
jharrington@bloombergindustry.com; Michael Ferullo at
mferullo@bloomberglaw.com
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Clara Hudson
Reporter