Follow the Money

Why haven’t Western companies lined up to demand that their governments repeal sanctions on Russia? After all, hadn’t they been used to making oodles of rubles? Wouldn’t they like to make some more?

I’ve never had much patience for the peculiarly Russian question of “кому это выгодно” – literally, “who benefits” – when it comes to policy analysis. It implies a logic that is simpler and more transparent than reality actually is and allows for a bit more solipsism than is generally healthy. But that doesn’t mean that it’s not worth following the money (to use the American idiom) – not because it always gets you where you need to go, but because it generally at least points in an interesting direction. And in the case of Russia and sanctions, it is particularly interesting to look at exactly who is making money in Russia.

To the rescue rides the Russian edition of Forbes, which just published a list of the 50 biggest foreign companies in Russia (by turnover). As Forbes notes, the list is full of German, French, American and other multi-national corporations, who together did several trillion rubles in business in Russia last year (sanctions be damned). The list runs the gamut from retailers like Auchan to consumer electronics companies like Apple, with automakers, pharmaceuticals, FMCG and a bunch of other things in between.

The interesting question, though, isn’t who’s doing business in Russia, but who’s doing an inordinate amount of business in Russia. Russia’s GDP represents about 3% of the global economy, so my rough definition of an ‘inordinate amount’ would be any company whose turnover in Russia is more than 3% of their global turnover. (Thankfully, Forbes provides that statistic.) And the list is telling.

In all, the list includes 22 companies who do more than 3% of their global business in Russia, topped by the Finnish tire company Nokian (who make 45% of their money in Russia). Below that, however, the list is dominated by:

  • high-volume, cut-price retailers (Globus, Auchan, Ikea, Metro, OBI, etc);
  • ‘big tobacco’ (BAT, Philip Morris, JTI); and
  • ‘big food’ & ‘big booze’ (Coca-Cola, Pepsico, Carlsberg, Danone, Mars, McDonalds).

Only two automakers do more than 3% of their global turnover in Russia (Kia and Mitsubishi, both at 4%), as does only one electronics company (BSH, with 5%).

Thus, the companies who are likely to care most about Russia, while important and powerful multi-national corporations, are by and large those who are also in the best position to shift rapidly to new markets, and who can scale their Russian operations up or down fairly easily, as the market demands. And while it’s not out of the question that they could lobby Washington or Berlin for a change in policy, the likes of ‘big tobacco’ and ‘big sugar’ have much weightier policy problems they’re trying to solve at the moment.

Russia will get a very different kind of hearing in Western capitals when its economy means more to the companies that dominate the stock exchanges – the computing and software companies, the big financial service firms, the telecoms and the logistics giants. A sanctions war with China would be devastating to companies from Oracle to JPMorgan, whose futures are intimately tied up with the world’s biggest growth market.

Russia, of course, can never match China, but that’s not the point. The point is that, if the Kremlin wants to understand why it’s not getting much help from its friends, it might, just this once, want to ask who actually benefits from doing business in Russia.

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