Firms from ‘unfriendly’ countries reportedly cannot withdraw their profits
Multinational companies from ‘unfriendly’ countries made large profits in Russia last year despite sanctions that their home countries placed on Moscow, the Financial Times reported on Monday, citing calculations by the Kiev School of Economics (KSE).
The KSE calculations are based on sources such as the Russian company register, news reports, and corporate statements.
Major Western brands that decided to continue operating in the country recorded over $18 billion in Russian profits in 2022, out of the $20 billion reported by all foreign businesses working in the country, the data showed.
“The figures may have grown considerably since then, although it is not possible to assess exactly how much since most international businesses operating in Russia only disclose their local results annually,” FT cited KSE deputy development director Andrey Onopriyenko, who compiled the data, as saying.
US-based companies reportedly made the largest total profit at $4.9 billion, followed by German firms with $2.4 billion, Austrian businesses with roughly $2 billion, and Swiss entities with around $1 billion.
Austria-based Raiffeisen Bank brought in the biggest Russia earnings among Western firms at around $2 billion in 2022, the data showed. This was followed by US tobacco giant Philip Morris with $775 million and beverage major PepsiCo with $718 million. Swedish truck maker Scania made $621 million in Russia in 2022, making it the largest earner among businesses that have since quit the Russian market.
However, most Western firms are reportedly unable to access the profits they made in Russia. Shortly after the conflict in Ukraine began, Moscow compiled a list of countries that had placed sanctions on Russia, deeming these nations ‘unfriendly’. They include the US, UK, EU states, Canada, Japan, among others. All transactions with companies from these countries have to be approved by the Russian government, and the local earnings of these companies are subject to a dividend payout ban. Dividend payments may still be approved if a special permit is granted by the Russian authorities, but, according to the report, few such permits have been issued so far.
Western firms can also obtain permission from a government commission to sell their business in Russia. However, such sales are usually made at a significant discount, and buyers of Western assets must pay a mandatory contribution to the Russian budget.
When asked to comment on the situation, Raiffeisen told the news outlet that it “does not have access” to its profits in the country. However, the lender has not written off the value of its Russian business. Philip Morris, PepsiCo, and Scania did not respond to requests for comment.