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Many American companies that waited to exit Russia are now struggling to leave

SCOTT DETROW, HOST:

The U.S. government and its Western allies imposed sanctions on Russia in an effort to hamper its ability to fund the war in Ukraine. But there are still Western companies operating in Russia, and getting out isn't as easy or clear-cut as it might seem. NPR international affairs correspondent Jackie Northam explains.

JACKIE NORTHAM, BYLINE: Just after Russian forces moved into Ukraine a little over a year ago, the U.S. and its allies began leveling sanctions against individuals, banks and companies with ties to the Kremlin. There was no requirement that U.S. companies leave Russia, but Western companies feared they could get caught up in sanctions, and there was public pressure to get out.

ADAM M SMITH: It was an incredibly frantic time.

NORTHAM: Adam M. Smith is a former U.S. Treasury Department official, now a partner at Gibson, Dunn & Crutcher.

SMITH: Here in the U.S., partners of mine in the U.K., across Europe, across Asia were responding to increasingly frantic calls from folks that didn't understand what these sanctions meant for them and, frankly, how to stay on top of it. And this was when sanctions were changing at a incredibly rapid clip.

NORTHAM: There were roughly 1,400 Western companies operating in Russia before the Ukraine war, according to Jeffrey Sonnenfeld with Yale's Chief Executive Leadership Institute. He says roughly three-quarters of those have withdrawn from Russia, including about 325 American companies. Some, like airlines, restaurant chains, energy and IT companies quickly pulled out, sold their franchises, severed their agreements with Russian companies or suspended operations. Sonnenfeld says others took much longer to get out.

JEFFREY SONNENFELD: There were companies that were going through stages of exit that had some difficulties getting out. There were some legal complications. There are franchise arrangements and things that made it hard for them to figure a way out.

NORTHAM: Sonnenfeld says about 400 companies still remain, including American ones.

Mark Dixon runs the Moral Ratings (ph) Agency, which also charts Western companies operating in Russia. His group, like Sonnenfeld's, keeps a long list of hundreds of companies in various stages of activity in Russia. He says some prominent firms have said they're getting out, but sometimes that's not the full picture.

MARK DIXON: Sometimes there's announcements only related to certain activities, and sometimes they were announcements of what they would do, but then the companies never followed through and actually did it.

NORTHAM: Daniel Treisman, a Russia specialist at UCLA, says some companies are hedging their bets to see what happens once the Ukraine war is over. He says Western companies run the risk of reputational harm if they stay, but could lose customers to other companies still in Russia if they go.

DANIEL TREISMAN: They don't want to be outmaneuvered by their rivals, so they don't want other firms from other countries - from China or from wherever - to step in when they step out and take over that part of the market.

NORTHAM: And companies, large or small, trying to exit Russia are facing a loss, says Daniel Tannebaum, who advises multinational companies at the consulting firm Oliver Wyman.

DANIEL TANNEBAUM: No one is really making money on exiting Russia because it's essentially a fire sale. For the companies that are still there that are planning to exit, there's some that are also trying to manage the cheapest exit, if that makes sense - really the least loss to their shareholders as possible.

NORTHAM: And the Russian government has been making it more difficult for companies to pull out, says Adam M. Smith.

SMITH: One of the things they've done in the past few months is impose what looks like an exit tax. Some percentage of that will go to the Russian Ministry of Finance or the Central Bank of Russia.

NORTHAM: Revenues which could be used for the war in Ukraine. In general, American companies currently are not required to pull out of Russia, but lawyer Tannebaum says the Biden administration is sending signals that could change.

TANNEBAUM: I think you're beginning to see more pressure and companies give in to that pressure of just, like, enough of waiting. Just leave. You're still on the ground.

NORTHAM: Another reason to get out - the real possibility the Russian government could just come in and seize the company.

Jackie Northam, NPR News.

(SOUNDBITE OF RUN THE JEWELS' "GET IT") Transcript provided by NPR, Copyright NPR.

Corrected: April 19, 2023 at 10:00 PM MDT
This story incorrectly identifies Daniel Tannebaum as a lawyer. He is an adviser to multinational companies at the consulting firm Oliver and Wyman.
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Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.
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