A recent study by researchers at the University of St. Gallen and the IMD institute in Lausanne reveals that despite widespread outrage over Moscow's war in Ukraine, only a small number of Western companies have left Russia. The study shows that "many firms headquartered in these nations have resisted pressures from governments, the media, and NGOs to leave Russia since the invasion of Ukraine."
The study, which was published last month by the Social Science Research Network, found that less than 10% of EU and G7 companies with Russian subsidiaries had divested them. By late November, only 120, or about 8.5% of those companies, had divested at least one subsidiary in Russia.
The research also showed that the exiting Western firms only accounted for 6.5% of the total profit before tax of EU and G7 firms with active commercial operations in Russia, while accounting for 15.3% of the total number of employees working for such firms in Russia. This indicates that, on average, the exiting firms tended to have lower profitability and larger workforces than the firms that remain in Russia.
The findings challenge the narrative that there is a vast exodus of Western firms leaving the Russian market, despite the political pressure from governments, media, and NGOs. Furthermore, these findings suggest that Western firms are not willing to decouple from economies their governments now deem to be geopolitical rivals.
The study also revealed that fewer than 18% of US subsidiaries operating in Russia had been completely divested since the invasion began. Meanwhile, 15% of Japanese firms and only 8.3% of EU firms had divested from Russia.
While there were more confirmed exits by US-based companies than those based in Europe and Japan, of those who have left their Russian subsidiaries in place, 19.5% are German and 12.4% are US-owned, according to the study.
These findings raise questions about the actual impact of sanctions and the extent to which Western firms are willing to prioritize geopolitical concerns over profits. However, it should be noted that the study was published as a pre-print and was not subjected to scientific peer review.
