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Tuesday, June 28, 2022

Why companies stay in Russia

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Düsseldorf (dpa) – Many German companies, from Adidas to VW, have stopped doing business in Russia for the time being due to the war in Ukraine. Others like Bayer, Henkel or Metro stick to it.

Given the general outrage over Russian aggression, it’s not easy for business. Why do they do it anyway? Is it about the responsibility of employees and customers or just money?

“Companies that remain in Russia are under enormous pressure to justify themselves,” observes marketing expert Karsten Kilian of the Würzburg University of Applied Sciences. “They often argue that the Russian population also needs to be taken care of, but given the difficult situation in Ukraine, that is not an easy position.”

Bayer gives reasons to stay

Trade expert Martin Fassnacht from the WHU business school in Düsseldorf also emphasizes: “It is not easy to justify why you continue to do business in a country that has started a war.” A company must have very good arguments if it wants to continue supplying the Russian market, otherwise it risks damaging its image in the long term. “How the profits made there are managed is very important.”

In any case, the pharmaceutical and crop protection group Bayer sees good reasons to remain active in Russia. “Depriving civilians of essential health and agricultural products, such as those used to treat cancer or cardiovascular disease, health products for pregnant women and children, and seeds to grow food, only It would multiply the number of lives this war is claiming.” He defended his decision. However, the concern has halted all advertising in Russia and Belarus and halted all investment projects indefinitely.

The Fresenius company from Bad Homburg Dax argues in a similar way. “Our responsibility as a healthcare company also includes not leaving our patients alone in Russia, but continuing to provide them with healthcare.” Patients there also rely on vital products and services. According to the information, Fresenius has about 100 dialysis centers for kidney patients in Russia, and about 3,000 people work for the group in the country. The share of the Russian business in Fresenius’ sales of 37.5 billion euros is “well below 1 percent”. But that’s still a lot of money: one percent would correspond to 375 million euros in sales.

Merck means patients

The Darmstadt-based pharmaceutical and technology group Merck also refers to its obligations to patients. “Our main priority is, of course, to ensure the safety of our employees and the supply of our medicines to patients,” says the Dax company, which does not have any major business in Russia. Local stocks have increased and will expand in the coming weeks.

“The issue of withdrawing from Russia is a double-edged sword for companies. Because there are good reasons for both decisions: go or stay”, says marketing expert Kilian. Of course, the important question is how important the Russian market is for the company, whether only goods are delivered or whether one has its own production facilities in Russia and what about the employees. But planning for day X after the end of the war is also of great importance.

Perhaps even more than the pharmaceutical manufacturers, the retailers still active in Russia are under pressure to explain. The Metro wholesale chain, for example, which keeps its 93 wholesale markets open in Russia. In a letter to employees, the Board of Directors emphasized: “We are aware that the situation of our 10,000 employees in Russia is not comparable to the acute suffering of Ukrainian employees, whose lives are threatened. However, we also have a responsibility to our Russian colleagues. None of them is personally responsible for the war in Ukraine.”

Russian employees a problem

According to the company, the cessation of commercial operations by Metro Russia would have a significant impact on the jobs of 10,000 people and the business of 2.5 million small and medium entrepreneurs. “This is why we decided to keep our Russian business,” the board said.

The Globus retail chain also has its 19 hypermarkets open in Russia and refers to the almost 10,000 Russian employees. The company does not want to hold them responsible for political decisions, “because we also perceive in them a strong desire for peace,” said Globus boss Matthias Bruch. “As a food retailer, we also feel that we have a special responsibility towards our Russian customers. We are co-responsible for the basic needs of the people.”

There’s a catch to the argument that you don’t want to meet ordinary Russian citizens who can’t help in the war, says marketing expert Fassnacht. “Because ultimately the sanctions are supposed to affect the whole country and thus increase the pressure on Putin.”

Nor should we forget that there is a lot of money at stake for companies. The Russian government has recently threatened to expropriate international companies that suspend business in the country. That drives the German economy. According to the Association of German Chambers of Industry and Commerce (DIHK), around 3,650 German companies were active in Russia before the outbreak of the Ukraine war. Many companies have been active in Russia for decades and are responsible for around 280,000 employees, said Michael Harms, Managing Director of the German Economic Committee for Eastern European Economic Relations.

“Ultimately, every business has to decide for itself whether to back off and, when in doubt, take the heat,” says marketing expert Kilian. “Anyone who can do that can have an advantage in the Russian market if the situation ever goes back to normal.”

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