May 6, 2022
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European drape from Russia: China, India, Turkey get a wide “window of opportunity”

European drape from Russia: China, India, Turkey get a wide

Photo: Valery Sharifulin/TASS

The stampede of large Western companies from Russia opens up a wide “window of opportunity” for business from friendly countries – China, India, Turkey, Iran. All of them are very willing to occupy market niches that have been cleared of Western firms and firms.

Those who did not run away already made good money

American and European publications talk with sympathy about the huge financial losses suffered by companies forced to leave the Russian market. However, there are also examples to the contrary. The more flexible and far-sighted Europeans, who managed to negotiate with Russian investors, not only did not incur costs, but even managed to make a considerable profit.

True, there are still only a few such companies, researchers from the Yale Management School calculated. We can recall the French financial conglomerate Societe Generale: its shares jumped 5% after the company announced that it was leaving Russia. True, for this the company had to write off 3.4 billion dollars. The French are selling their Russian business – Rosbank – to the Interros group Vladimir Potanin.

Potanin, unlike many of his colleagues in the shop (for example, the owner of Alfa-Bank Michael Friedman) was not under the personal sanctions of Western countries. That is why the deal to sell Rosbank went off without a hitch for the French.

Researchers from the Yale School of Management note that there are few such examples. Many large companies that remained in Russia faced, first of all, reputational costs: the aggressively Russophobic public puts pressure even on well-known and popular brands. Because of this, the shares of many companies that remained in Russia fell by 15-30%, although key market indices have declined by only 2-3% since the start of the special operation.

However, the panic and inadequate reaction of the financial markets was especially noticeable in the first weeks after the start of the special operation. Then the economic situation stabilized.

That is, the researchers note, those Western companies that have stoically survived the last few months and did not panic and flee Russia have almost regained their lost capitalization.

Neither Auchan nor Armani want to break with Russia

Companies that derive most of their income from Russia did not make hasty decisions to leave the market. For example, the study mentions that 20 French companies did not leave Russia, such as clothing manufacturers Lacoste and LaRedoute, underwear manufacturer Etam, cosmetics manufacturers Dessange and Laboratoire Servier, electrical goods manufacturers Legrand, and many others.

None of them not only announced their withdrawal from Russia, but even the curtailment of their operating activities. The French BlaBlaCar, which allegedly left Russia, actually remained in the country, although it stopped new investments.

French companies that produce food in Russia have shown social responsibility. Thus, Bonduelle and Groupe Le Duff completely retained their Russian business, Danone suspended all investment projects, but continues to produce dairy products.

Cosmetics giant Sanofi has put a freeze on all advertising and promotion spending and on attracting new patients. At the same time, the company continues clinical trials, it does not refuse medical support and treatment of current patients.

It is curious, for example, that the distribution networks of three large brands – Auchan, Leroy Merlin and Decathlon – belong to the same Mulliez group. At the same time, Auchan and Leroy Merlin stores continue to operate smoothly in Russia, while Decathlon has problems. Sports shops are closing, not at all because of sanctions or the notorious “cancellation culture”, but because of disruptions in supplies from France (decathlon’s assortment is dominated by non-Russian products).

Moreover, what is important, the continuation of the work of French companies in Russia is not the intention of business, but of the authorities. Back in early March, at the Elysee Palace, President Emanuel Macron brought together the largest businessmen whose companies operate in Russia, and gave instructions: do not leave Russia.

When politicians run the business, the economy collapses

Many large Italian companies are in no hurry to leave Russia, economists have found out. Major consumer brands such as Geox, Bennetton, Calzedonia, Diesel and Armani continue to operate.

Still, the impact of angry public opinion on big business in Italy is much lower than in other European countries. French and Italian business, alas, stands apart from the Western one.

German companies are fleeing from Russia en masse (there are still 8 large manufacturers on the Russian market, calculated at the Yale Management School, including Metro, Globus, Hoffmann, Liebherr) or Spanish (5 companies remain, including narrow-profile and little-known Grupo Fuertes, Maxam , Sodeca).

Most of the Canadian, British or American companies operating in various markets, from energy to food, shamefully fled from Russia. Neither the loss of billions of dollars of investments, nor the merciless loss of familiar products and services by Russians frightened them.

This is what happens when politics takes precedence over economics. The only good news is that companies from friendly countries will soon be cleared of toxic Western business.

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