Ukraine crisis overturns decades of foreign investment
By Zion Rufus
It is expected that the mass exodus of multinational firms from Russia in the last two weeks coupled with increased government sanctions will shake the global financial market. Also, demands by consumers to boycott global brands that are yet to take action on the Russia-Ukraine crisis will add more pressure to an already strained global supply chain.
Besides Coca-Cola, Pepsi, McDonalds who have been compelled by their customers to take action, some of the brands that have announced their exit from their Russian networks include KPMG, Nestle, Unilever, PwC, IBM, Shell, Microsoft, HP, and Mastercard amongst others.
In a statement on the economic impact of war in Ukraine on the rest of the world, the International Monetary Fund said that while the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious. Currently, Energy and commodity prices have surged, adding to inflationary pressures from supply chain disruptions and the rebound from the Covid‑19 pandemic. Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses. Should the conflict escalate, the economic damage would be all the more devastating. The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries. This crisis will create complex policy tradeoffs, further complicating the policy landscape as the world economy recovers from the pandemic crisis.
KPMG
Multinational professional services network, KPMG which has operated in Russia for more than three decades and has about 4000 partners and staff, announced that its Russia and Belarus firms will leave the KPMG network.
A spokesperson for KPMG International said: “We believe we have a responsibility, along with other global businesses, to respond to the Russian government’s ongoing military attack on Ukraine. As a result, our Russia and Belarus firms will leave the KPMG network. KPMG has over 4,500 people in Russia and Belarus, and ending our working relationship with them, many of whom have been a part of KPMG for many decades, is incredibly difficult. This decision is not about them – it is a consequence of the actions of the Russian Government. We are a purpose-led and values-driven organization that believes in doing the right thing. We will seek to do all we can to ensure we provide transitional support for former colleagues impacted by this decision.”
Shell
Energy company Shell plc built Russia’s first liquefied natural gas facility. The Company which has also operated in Russia for decades announced its intent to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG) in a phased manner, aligned with new government guidance. As an immediate first step, the company will stop all spot purchases of Russian crude oil. It will also shut its service stations, aviation fuels and lubricants operations in Russia.
The company said in a blogpost: “Immediately, we will stop buying Russian crude oil on the spot market and we will not renew term contracts. At the same time, in close consultation with governments, we are changing our crude oil supply chain to remove Russian volumes. We will do this as fast as possible, but the physical location and availability of alternatives mean this could take weeks to complete and will lead to reduced throughput at some of our refineries. We will shut our service stations, aviation fuels and lubricants operations in Russia. We will consider very carefully the safest way to do this, but the process will start immediately. We will start our phased withdrawal from Russian petroleum products, pipeline gas and LNG. This is a complex challenge. Changing this part of the energy system will require concerted action by governments, energy suppliers and customers, and a transition to other energy supplies will take much longer.”
Unilever
FMCG giant, Unilever has operated in Russia since 1992. The multinational consumer goods producer announced a €5m worth of donation in form of food, personal care and hygiene products to those impacted by the war
Unilever CEO, Alan Jope said: “We join the many voices calling for its end, and hope that peace, human rights, and the international rule of law will prevail. The people of Ukraine are utmost in our thoughts at this desperate time and we have been focused on doing everything we can to protect the safety of our 146 employees and their families across the country. To support the global humanitarian response, we are working with NGO partners on the ground to donate €5m worth of food, personal care and hygiene products to those impacted by the war.”
HP
According to research firm IDC, in the fourth quarter of 2020, HP was the largest supplier of PCs to Russia with 18% market share. However, pausing all its Russian marketing and advertising activities, the company has announced the suspension of shipments to Russia.
The tech company announced: “We are acting with urgency to support HP employees, their families and our partners in Ukraine, Russia, and neighboring countries. The HP Foundation is also providing grants to support Ukrainian relief efforts – working with NGOs such as UNICEF, UNHCR and the Polish Red Cross, and we are matching employee donations made through our HP Giving and Volunteering program. From a business perspective, we have suspended shipments to Russia and paused all Russian marketing and advertising activities. HP stands with the global community in calling for an immediate end to the violence and the restoration of peace in the region.”
Microsoft
Although Tech giant Microsoft does not own any data centers within Russia, Russians just like the rest of the world are heavy users of the multi enabling platform.
Microsoft said: “We are announcing today that we will suspend all new sales of Microsoft products and services in Russia. In addition, we are coordinating closely and working in lockstep with the governments of the United States, the European Union and the United Kingdom, and we are stopping many aspects of our business in Russia in compliance with governmental sanctions decisions. We believe we are most effective in aiding Ukraine when we take concrete steps in coordination with the decisions being made by these governments and we will take additional steps as this situation continues to evolve. Our single most impactful area of work almost certainly is the protection of Ukraine’s cybersecurity.”
IBM
Besides HP and Microsoft, Russian companies and government agencies have also long relied on American multinational technology corporation, IBM to analyze data, store records, and generally manage their operations. The Poisk, released in 1989, was the most common IBM-compatible Soviet computer. In 1989, the Moscow Institute of Thermal Technology acquired 70 to 100 IBM XT-AT systems with 8086 microprocessors.
However, the company which has been operating in Russia for more than 30 years announced: “We have suspended all business in Russia. In Ukraine, we have been in constant touch with our local teams and continue to provide assistance that includes relocation and financial support. The safety and security of IBMers and their families in all areas impacted by this crisis remains our top priority.”
PwC
With 3700 staff, accounting firm PricewaterhouseCoopers LLP also announced plans to exit its Russian network.
The company said in a release: “As a result of the Russian government’s invasion of Ukraine we have decided that, under the circumstances, PwC should not have a member firm in Russia and consequently PwC Russia will leave the network. Our main focus at PwC continues to be doing all we can to help our Ukrainian colleagues and support the humanitarian efforts to aid the people of Ukraine who have been devastated by this invasion. We are also committed to working with our colleagues at PwC Russia to undertake an orderly transition for the business, and with a focus on the wellbeing of our 3,700 colleagues in PwC Russia.”
Mastercard
Mastercard has operated in Russia for almost three decades. The company disclosed that following the sanctions, cards issued by Russian banks will no longer be supported by the Mastercard network regardless of where they’re used – inside or outside of Russia. And, any Mastercard issued outside of the country will not work at Russian merchants or ATMs.
Mastercard said: “We have decided to suspend our network services in Russia. This decision flows from our recent action to block multiple financial institutions from the Mastercard payment network, as required by regulators globally. We don’t take this decision lightly. Mastercard has operated in Russia for more than 25 years. We have nearly 200 colleagues there who make this company so critical to many stakeholders. As we take these steps, we will continue to focus on their safety and well-being, including continuing to provide pay and benefits. When it is appropriate, and if it is permissible under the law, we will use their passion and creativity to work to restore operations.”
Nestle
Nestle opened its official representative office in Russia in 1995. Mark Schneider, Nestlé CEO said in a release: “At Nestlé, we are prioritizing safety and support for our employees in the region. We are committed to helping our teams and their families navigate this situation, which we know has brought unimaginable challenges for their security and wellbeing, as well as their mental and emotional health. Many of my Nestlé colleagues around the world have reached out in an effort to find ways to help and support. That’s why, beginning today, we are matching employee donations to the International Federation of Red Cross Societies (IFRC), up to CHF1 million. As our trusted and long-standing global partner, IFRC donations will help provide shelter, basic aid items, and medical supplies to people in need in the region. This is in addition to our significant food and product donations on the ground, and we won’t stop there.”
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