“Satisfied with the business climate”: how foreign business continues to work in Russia after resignations

Against the backdrop of mass statements by business representatives about leaving Russia, most foreign companies continue to operate in the country.

This was announced on Monday, January 9, by Chairman of the State Duma Vyacheslav Volodin.

According to him, a total of 75.9% of foreign organizations preferred to remain on the Russian market.

Such a business decision “says a lot,” the parliamentarian believes.

“They believe in good prospects for the development of the economy of our country, they are satisfied with the business climate.

Those who left endure billions of dollars,” Volodin wrote on his Telegram channel.

Recall that many international companies began to leave Russia in the spring of 2022.

This began after the Western states imposed large-scale sanctions against Moscow because of the events in Ukraine.

According to experts, the refusal to work in the Russian Federation was largely caused not by economic reasons, but by external political pressure on business.

“Large foreign companies are under unprecedented pressure.

Many of them are tied to large government orders, which are now actively manipulated by Western politicians.

Therefore, it is very difficult for the enterprises remaining in Russia to work now, as the West is constantly pressing on them, ”said Alexander Kalinin, president of the all-Russian public organization of small and medium-sized businesses Support of Russia, in a conversation with RT.

Nevertheless, according to the specialist, even in the current conditions, the bulk of foreign firms do not want to leave Russia.

As the expert explained, at one time these organizations invested a significant amount of funds in the development of their business in the Russian Federation, including investments in staff training and the purchase of equipment.

In addition, entrepreneurs do not want to lose a large market with about 150 million consumers, Kalinin added.

“Often, for development, foreign businesses took loans from banks that no one would write off for them.

It is necessary to support and repay debts, and this can only be done at the expense of normally operating enterprises.

The logic of the remaining business is built on the fact that politics should not break economic ties that have sometimes been built for centuries, ”he said.

As a result, about 5% of foreign firms actually ceased to work in Russia, while other enterprises only limit their activities or sell their assets to local investors.

Anatoly Aksakov, head of the State Duma committee on the financial market, told RT about this.

“Approximately 40-50% of companies made statements about leaving, but, in fact, almost all of them remain.

Either the signs are changed, or this business is formally transferred to the ownership of someone, but they continue their activities.

Moreover, almost everyone claims to return to Russia after some time, ”said the interlocutor of RT.

Similar assessments were previously presented at the Center for Strategic Research (CSR).

According to experts, from February to September 2022, out of the 600 largest foreign companies in Russia, a little more than a third of organizations limited their work.

At the same time, about 130 firms announced plans to leave the country, but no more than 5% of them actually stopped their activities.

As calculated in the CSR, 69% of companies wishing to leave Russia sell a local division to a new owner.

Moreover, at least 30% of such transactions provide for the possibility of returning assets to the original owner.

Under these conditions, for example, Renault and McDonald's left Russia.

“The new owners of the former divisions of foreign companies act, as a rule, promptly: 90% of their divisions have already officially resumed their activities, which made it possible to save about 150,000 jobs,” the CSR study says.

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Moreover, foreigners have to sell their business in Russia at significant discounts.

The average size of such a discount is about 70%, while the largest losses are incurred by enterprises in the oil and gas industry, the banking sector, as well as the automotive and food industries.

“Companies that have limited their activities or announced they are leaving the Russian market have already lost from $200 billion to $240 billion since the end of February 2022, of which $70 billion to $90 billion is accounted for by businesses that have decided to leave Russia.

Businesses from the US, UK and Germany report the largest losses in value terms, but in terms of GDP, such losses have the greatest impact on the economies of Finland, Sweden, the UK and Denmark.

A matter of technology

In general, according to the experts of the Center for Strategic Research, the decision of a number of foreign companies to withdraw did not have a devastating effect on the Russian economy, contrary to the statements of some foreign politicians.

Nevertheless, a number of industries may still experience difficulties, including due to reduced access to technology, experts admit.

A similar point of view is shared by the chief analyst of TeleTrade, Mark Goykhman.

“The main negative is that high-tech companies are leaving the market, which largely ensured the use of modern technologies, equipment, materials and components for the development of production.

As a result, in a number of areas, there is a lack of modern production capabilities, which limits the volume, assortment, and quality of goods and services,” Goykhman explained.

In his opinion, in the long term, this state of affairs may contribute to the economy lagging behind global trends, slowing down labor productivity and slowing down GDP growth.

However, the state and business are trying to avoid such a development of events by stimulating import substitution, as well as searching for alternative suppliers of products and equipment.

“We see that parallel imports are actively developing.

In addition, foreign companies in many cases do not close the door behind them completely, but leave potential opportunities for returning to the Russian market.

Therefore, in the event of a weakening of the factors that led to the departure of Western business, its return on one scale or another will be possible,” Goykhman added.

To replace competitors

At the same time, according to Vyacheslav Volodin, Russian companies are replacing departed Western competitors and increasing production volumes.

For example, the production of clothing in the country grew by 42%, and medicines - by 15%, the speaker of the State Duma noted.

A similar trend is recorded in the Kremlin.

Presidential spokesman Dmitry Peskov said on Monday that Russian business is “very nimble” in occupying empty spaces in the market.

“Someone left, someone stayed.

Those who left could not leave a void behind them, because the market is arranged in such a way that it instantly fills up, ”TASS quotes Peskov as saying.

According to Vyacheslav Volodin, today it is important that business be nationally oriented.

As the parliamentarian explained, the funds earned by companies should remain in the country and be further used for its development.

“Last year, a law was passed banning the issuance of licenses for the development of subsoil, oil and gas fields to foreign companies.

Now it is obligatory to create a legal entity in the Russian Federation.

Foreign participation in concessions related to transport infrastructure and transportation is also prohibited.

In the first reading, a bill was adopted that does not allow offshore companies to be concessionaires in the housing and communal services sector.

But much remains to be done,” the parliamentarian concluded.