Two years after Ukraine invasion, the corporate fight against Russia continues

By James Rogers

The actions of major corporations are key to isolating Russia and helping rebuild Ukraine

Two years after Russia launched its full-scale invasion of Ukraine, Kyiv's efforts to defeat Moscow are being played out not just on the battlefield but also in boardrooms around the world.

Following its invasion and the imposition of U.S. and partners' sanctions and other economic measures, Russia's economy contracted by 2.1% in 2022, according to U.S. Department of Treasury data. Russia's economy is also more than 5% smaller than had been predicted prior to the escalation of the military incursion, the Treasury said in December, and the country is far underperforming other energy exporters, including the U.S.

A slew of major Western corporations such as U.S. giants Apple Inc. (AAPL), Alphabet Inc. (GOOGL) (GOOG), Amazon.com Inc. (AMZN), International Business Machines Corp. (IBM) and McDonald's Corp. (MCD) have also left Russia in response to Moscow's invasion of Ukraine.

Related: Ukraine wants U.S. investment firms to invest and create jobs in small businesses amid war in the country

As of Feb. 22, 2024, over 1,000 companies have curtailed their operations in Russia, according to data compiled by Yale University professor Jeffrey Sonnenfeld and his team of experts, research fellows and students at the Yale Chief Executive Leadership Institute.

Since the full-scale invasion began on Feb. 24, 2022, the researchers have been tracking the responses of over 1,500 companies. "Over 1,000 companies have publicly announced they are voluntarily curtailing operations in Russia to some degree beyond the bare minimum legally required by international sanctions - but some companies have continued to operate in Russia undeterred," they say, on their website.

U.S. network-security company Cloudflare Inc. (NET) is one of 218 companies "continuing business as usual" in Russia, according to Sonnenfeld's team.

Related: White House confirms Russia has obtained a 'troubling' anti-satellite weapon

Cloudflare has not responded to requests for comment from MarketWatch for this story, but in a blog post in April 2022 its CEO, Matthew Prince, said that the company has "minimal" sales and commercial activity in Russia. "We've never had a corporate entity, an office, or employees there - and we've taken steps to ensure that we're not paying taxes or fees to the Russian government," he wrote. "But given the significant impact of our services on the availability and security of the Internet, we believe removing our services from Russia altogether would do more harm than good.

"While we deeply appreciate the motivation of the calls for companies to exit Russia, this withdrawal by Internet companies can have the unintended effect of advancing and entrenching the interests of the Russian government to control the Internet in Russia," he added.

Cloudflare has also thrown its weight behind Ukraine's internet services. "We helped make sure that the Ukrainian infrastructure stayed online," said Prince, in a "20VC with Harry Stebbings" interview in October 2023. "In exchange for that, I have been personally sanctioned by the Russian government."

Related: Ukraine wants U.S. investment firms to invest and create jobs in small businesses amid war in the country

"I am proud of the fact that we are continuing to help Ukraine win the war," he added.

Unilever (NL:UNA) (UK:ULVR) is also under close scrutiny, and has been slammed by the Economic Security Council of Ukraine over its Russian operations. Sonnenfeld's team classifies the consumer-goods giant as one of 175 companies "buying time" in terms of their approach to Russia. A spokesperson for Unilever directed MarketWatch to a statement from CEO Hein Schumacher in October 2023. "I have now had the opportunity to review the presence of our business in Russia, and I have listened carefully to our stakeholders and many experts on this matter," he said. "After looking at the situation in detail, it is clear that the containment actions we have taken minimize Unilever's economic contribution to the Russian state.

"However, I understand why there are calls for our company to leave the country, and we continue to look at our options within a context that has become more complex following recent regulatory developments in Russia," he added. "We remain steadfast in our condemnation of the war in Ukraine."

Related: How Ukraine is planning to recover with help from Western companies

Efforts to isolate Russia have also brought attention to so-called gray markets, where products are purchased outside of a manufacturer's authorized distribution channels.

The Economic Security Council of Ukraine, which was set up to develop expertise in identifying and counteracting internal and external threats to Ukraine's economic security, says oversight of supply chains is critical.

"During the two years of the full-scale invasion, the international community has been actively fighting Russian supply chains on the sanctions front," said Denys Hutyk, senior adviser to the Economic Security Council, in a statement. "However, sanctions are not the only solution. Efficient and up-to-date corporate compliance and due diligence are no less important.

"Western manufacturers of products critical to the Russian military-industrial complex have perhaps the greatest influence on disrupting the supply chains of the aggressor," Hutyk added. "With the line between civilian and military products being increasingly blurred, insufficient and passive control of manufacturers over their supply chains is gradually turning into a threat to global security."

Related: Most Ukrainian companies are fully operational after 18 months of war, Kyiv-based American Chamber of Commerce says

Two years after Russia launched its invasion, eight years after illegally annexing the Crimean Peninsula and occupying parts of eastern Ukraine, Ukraine's economic recovery is also in the spotlight. On the second anniversary of the scaled-up invasion 86% of companies surveyed by the American Chamber of Commerce in Ukraine are fully operational, while 12% continue to operate partially, the chamber said Friday.

"Despite the hardship, and inspired by the brave defenders, the business community continues to operate and believe in Ukraine, keeping the economy running, taxes paid, and Ukrainians employed," said American Chamber of Commerce in Ukraine President Andy Hunder, in a statement.

Ukraine, Hunder said, remains open for business.

Some 125 CEOs and top managers from American Chamber of Commerce in Ukraine member organizations participated in the survey. The 600-plus members of the chamber include Boeing Co. (BA), Coca-Cola Co. (KO), Delta Air Lines Inc. (DAL), Lockheed Martin Corp. (LMT), Microsoft Corp. (MSFT), Oracle Corp. (ORCL), PepsiCo Inc. (PEP) and Pfizer Inc. (PFE).

-James Rogers

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02-24-24 0631ET

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