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The Corporate Response to Russia’s Invasion

Amante Abela

In the four weeks following the Russian invasion of the Ukraine, the most intense conflict in Europe since World War II, the response of the West has been unprecedented in its speed and severity. Russia is now the world’s most sanctioned country, subject to over 5,000 different sanctions that target politicians, oligarchs, sovereign debt and the Russian military-industrial complex. However, in a globalised world dominated by transnational corporations, the swift response of big business has arguably been even more remarkable.

Indeed, the list of companies that have cut ties with Russia due to the sanctions or in protest of Moscow’s invasion is extensive and growing by the day, with over 400 of the world’s most recognisable companies having withdrawn from Russia: American Express; Apple; Boeing; BP; Coca-Cola; Ford; Levi Strauss & Co; McDonald’s; Nike; Warner Bros; The Big Four accounting firms. Out of these companies, the resulting damage of withdrawing, as well as the ability to resume business in Russia at a later date, varies considerably. For example, Warner Bros. pulling theatrical releases of new films is not comparable to the US$25 billion loss BP will incur upon exiting its 19.75% stake in Russian oil company Rosneft.

Notwithstanding the differing corporate consequences, such business decisions broadly correlate to acts of corporate social responsibility (CSR). According to McWilliams and Siegel (2001), CSR refers to “actions that appear to further some social good, beyond the interests of the firm and that which is required by law”. Such actions may take the form of corporate donations, sponsorships and funding community projects. A common critique of CSR as some commentators have pointed out in the wake of the invasion is that sometimes boycotts can amount to mere “window dressing”. In support of this proposition, they point to the indifference such transnational corporations seem to present towards alleged human rights abuses against Uyghurs and other Turkic Muslims in the northwest region of Xinjiang.

Of course, the reality is that the repercussions of boycotting each market are wildly different. The Chinese economy dwarfs its Russian counterpart with a GDP of US$14.72 trillion compared to $US1.48 trillion. China’s consumer spending is over US$6 trillion and growing whereas Russia’s is around US$700 billion and stagnant at best. Not only is there more consumer demand for the products of transnational corporations in China but ‘the world’s factory’ is fundamental to the global value chains relied upon to move goods all over the world. In the case of Apple, China is not only a relatively cheap and abundant source of labour for production, but a significant source of sales, with Greater China revenue amounting to US$21.31 billion in the quarter ended December 26. In contrast, Apple’s decision to halt the sale of all of its products in Russia will only result in US$1.14 billion annually in lost iPhone sales. Ultimately, even if China attempted to invade Taiwan in the same way Russia invaded Ukraine, it would be questionable whether these multinationals could even afford to cease operations in China.

It should also be noted that there is invariably a point at which CSR turns into poor financial management. In reality, each of the over 400 companies that have withdrawn from Russia have done so by weighing up the reputation damage of dealing with Putin’s regime against the impact on the organisation’s profitability and performance. JPMorgan anticipates Russia's GDP to slide 35% in the second quarter and 7% in 2022, akin to the 10% decline during the 1998 Russian financial crisis in which the ruble sharply devalued and the Russian government had to default on its domestic debt. In light of this, there is little doubt that we live in an age when transnational corporations are not only responsive to public sentiment but also wield considerable power, with the ability to recast themselves as political actors and arbiters in international relations.

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