- Many companies announced they were exiting Russia following the invasion, but just 535 have made a clean break since February 2022.
- The Kremlin has been making it more difficult for companies to exit the Russian market.
Russia is making it really difficult for international companies wanting to exit its market.
Despite 1,000 companies announcing they were voluntarily cutting back on operations merely two months after the Ukraine war started in February 2022, just 535 foreign companies have made a clean break with the country 18 months on, an ongoing study from Yale University last updated on September 6 found.
Not only do the companies have their internal struggles, but Russian authorities have also steadily increased the hurdles — such as regulatory approvals and financial penalties — for Western companies that are taking longer to leave the market.
The pace of such measures appeared to have kicked into high gear from December 2022.
Even London-based law firm Linklaters said in a March 2023 blog post that "the legal situation for multinational companies operating in Russia continues to become more precarious by the day."
The Russian foreign ministry did not immediately respond to a request for comment from Insider sent outside regular business hours.
Here's a timeline of five major hurdles Russia has imposed on companies looking to flee its heavily sanctioned economy since the Ukraine war broke out. This list is not exhaustive as Russian corporate laws and regulations have been changing rapidly since the war started.
December 2022: Russia started demanding steep discounts on assets up for sale
Russia introduced new measures demanding a 50% discount on the assets of companies that want to exit its market.
The move seems to have benefited Russian businessmen who bought the assets of 110 Western companies "that have fully or partially left Russia" at bargain-bin prices, per independent Russian newspaper Novaya Gazeta.
Some companies trying to exit Russia recently are facing demands of even steeper discounts, Reuters reported on August 25, citing three persons familiar with exit processes for foreign companies.
Companies' exit plans also need to be approved by a government commission. Those operating in strategically important sectors — such as energy and resources — also need President Vladimir Putin's seal of approval.
March 2023: The Kremlin told exiting companies to donate to the country
Investors who are selling their businesses and are from "unfriendly countries" — those that have imposed sanctions against Russia over its invasion of Ukraine — must donate at least 10% of the sale proceeds to the Russian budget, according to the country's finance ministry.
It's unclear how many companies have paid the donations so far.
April and July 2023: Russia seized the operations of Western firms, including Danone and Carlsberg
Days before the invasion of Ukraine in February 2022, Russia approved measures that could lead to the nationalization of foreign firms suspending their operations or leaving the market.
In April this year, that possibility got real for companies when Moscow took control of the Russian subsidiaries of two energy firms — Germany's Uniper and Finland's Fortum — after Putin signed a decree ordering the move.
Both firms had been trying to exit Russia for months before the seizures, before the sudden takeover.
Kremlin spokesperson Dmitry Peskov said at the time that the seizes were in retaliation to what he said were similar moves from Western nations, which blocked or seized $58 billion of assets controlled by Russia in the one year since Russia invaded Ukraine.
In July, Moscow targeted the Russian assets of food and beverage giants Danone and Carlsberg for seizures. Russia did not give any specific reasons for the seizures, but they happened after people close to Putin's regime expressed interest in the assets, the Financial Times reported in July.
July 2023: Moscow is imposing a new rule giving it priority rights to acquire shares from exiting companies
Russia was looking to approve a new rule that allows the Kremlin to have "super priority rights" to acquire the shares of strategic companies whose foreign shareholders are leaving the country, Interfax news agency reported in July.
The rule could even supersede the rights of others who may also be entitled to the shares of the exiting foreign shareholders.
August and September 2023: Russia said it would not let banks exit the country unless it fulfilled one condition
Russia now appears to be targeting banks that want to flee its market.
In August, a Moscow court banned two major Swiss banks — UBS and Credit Suisse — from trying to exit the market after Moscow-based Zenit Bank requested the ban, citing concerns about losing money should the two Swiss banks leave.
A month later, in September, Russia demanded foreign banks unfreeze Russian assets if they wanted to exit the market.
"We have stated our position, and it stands — we will be tough in letting foreign banks go, it will depend on the decision to unfreeze Russian assets," Alexei Moiseev, Russia's deputy finance minister, said at a forum on Friday, Reuters reported.
Western banks still operating in Russia appear to be stuck between Moscow's demands and the European Union's pressure to get out of the market as soon as possible.
Raiffeisen Bank is the largest Western bank still operating in Russia. It is working on a sale or spin-off of its local business and said in its half-year report that "the local and international laws and regulations governing the sale of businesses in Russia are subject to constant change."