According to a report from Bloomberg earlier this week, Russian businesses are seizing the opportunity to fill the void left by international companies and are reaping the benefits of acquiring the assets of exiting Western firms at discounted prices. This trend comes as a response to intense international pressure from sanctions and the departure of Western firms following Moscow’s military operation in Ukraine.
The effects of this exodus can be seen in the abrupt departure of well-known companies such as McDonald’s, Ball, and Henkel, which have left Russia due to the aforementioned sanctions and pressure from their own investors. Western firms have sold businesses in Russia amounting to at least $21 billion in assets in 2022 and the first half of this year, based on an estimate from the AK&M news and research agency.
The new influx of Russian entrepreneurs, who are relatively unknown outside the country and have not been targeted by US or EU sanctions, are stepping into the void left by the departing Western firms. These entrepreneurs are capitalizing on the opportunity by acquiring assets at lowered prices previously held by Western companies. For instance, Aleksey Sagal’s Arnest Group successfully acquired Ball’s Russia-based beverage packaging business for $530 million and 100% of the shares in the Russian assets of Heineken for a mere €1.
Aleksandr Govor, known for his wealth from the coal business, took over the McDonald’s franchise in Russia after the US giant opted to leave the market. Through his acquisition, Govor expanded the fast-food chain to over 850 Russian outlets under the new brand name ‘Vkusno i Tochka’, which roughly translates to ‘Just Tasty’.
Additionally, Russia’s richest man, Vladimir Potanin, seized the opportunity to buy Rosbank from the French banking group Societe Generale last year amidst the exit of Western firms. This move allowed Potanin to expand his business portfolio despite being personally sanctioned by the US and the UK in December 2022.
The departure of multinational companies from Russia was intended to weaken the Russian economy. However, the reality seems to be quite the opposite. The exodus has played right into the hands of a new wave of Russian businessmen, as Moscow has implemented tough regulations and financial obligations for Western firms seeking to exit the country. These regulations require firms leaving Russia to sell their assets at a 50% discount, obtain government permission for the sale, and pay a mandatory contribution to the Russian budget amounting to at least 10% of half the market value of the company’s assets in the country.
The boon for Russian entrepreneurs and businessmen amid the exit of Western firms serves as a signal that Russia’s economy is adapting and shoring up support for domestic businesses. This demonstrates the resilience of Russia’s economy amidst external pressures and provides hope for the future growth and development of Russian businesses.