Russian prosecutors have issued warnings to Western companies in Russia, threatening to arrest company executives who criticize the government or seize assets of companies that have left the country, officials familiar with the matter said.
Prosecutors have issued warnings in the past week to various companies, including Coca-Cola, McDonald’s Corporation, Procter & Gamble, IBM and the company that owns the KFC food chain, Yum Brands, officials said. They said the calls, letters and visits included threats to sue the companies and seize assets including registered trademarks.
Russian President Vladimir Putin last week expressed support for a law to nationalize the assets of foreign companies that have left the country due to its invasion of Ukraine. The plaintiffs’ warnings were aimed at companies in all areas, including technology, food, clothing and banking, said people familiar with the matter.
The warnings caused at least some of the companies that received them to reduce communication between the Russian department in the company and the rest of its departments, assuming that the Russians might eavesdrop on text messages or e-mails between colleagues, some sources said.
Other companies have been working to relocate executives from Russia to other locations, said other people familiar with the matter.
Spokesmen for Coca-Cola, IBM, Procter & Gamble and McDonald’s declined to comment. A Yum spokeswoman declined to comment further on statements made by the restaurant company in the past regarding its decision to shut down KFC and Pizza Hut branches in Russia.
More than 350 companies have said they will leave or temporarily stay in Russia
At the end of Sunday, after the publication of this article, the Russian embassy in Washington tweeted it, and pasted it with a “Pike News” label. “The decision whether to continue entrepreneurial activity in our country is entirely up to the Americans,” the tweet read. “And the right to ignore the rosophobic hysteria that encourages foreign companies to incur huge losses in order to harm Russia.”
A series of companies have announced plans to suspend or reduce their activities in Russia following Putin’s invasion of Ukraine and the sanctions imposed by Western governments.
Many companies, especially those involved in sales and manufacturing, have said their decision to cease operations is temporary. Some said they had to suspend operations because of disruptions caused by sanctions to supply chains. Others said they would leave forever.
In addition, the companies evaluate their departments in Russia in a different way given the economic instability and the expectation that conditions will be volatile for a period of time, said people briefed on the issue. Despite the plaintiffs’ warnings, there are some companies that have no intention of changing the decision to leave Russia or stop operating there, the people said. It would also be difficult for companies to smooth the transition of activity to Russia if the government tries to force executives on its behalf, one of the people said.
Russia’s Attorney General’s office said Friday it would make sure companies that said they were halting or leaving the company would abide by the country’s employment rules. More than 350 foreign companies have said they are leaving or temporarily staying in Russia, according to the Yale University School of Management.
Wall Street banks like Goldman Sachs, consumer goods companies like Coca-Cola, retailers like Lewis and tech giants like Apple have all announced plans to go out. Energy giants like BP, Exxon Leads have said they will exit operations in Russia.
On the way to nationalization?
Putin has adopted a plan he flooded last week with a senior member of his United Russia party to nationalize the activities of Western companies leaving the country. Such a move would prevent mass layoffs and preserve Russia’s ability to produce products locally, said Andrei Torczak, secretary general of the United Russia Party.
Washington has warned against any attempt to nationalize any company.
“Any unlawful decision by Russia to seize the assets of these companies will ultimately bring even more economic pain to Russia,” and may call for legal action, White House spokeswoman Jen Saki wrote in a tweet on Thursday.
The U.S. Chamber of Commerce monitors reports that the Russian government could seize assets of large Western companies, said Neil Bradley, the bureau’s chief policy officer. The Russian for more pain, “he wrote in a statement.
Last week, the Coca-Cola Company announced that it was suspending operations in Russia. Coca-Cola’s businesses in Russia and Ukraine accounted for 1% to 2% of the company’s operating revenues in 2021. The company has a 21% stake in Coca-Cola HBC, a partner that bottles and distributes the drink in the area, as of December 31.
Restaurant company Yum said last week that it was temporarily closing the company’s 70 KFC branches and signing an agreement with franchisee Pizza Hut to halt operations at 50 other branches. The company has also suspended all investment plans and development of restaurants in Russia, it was reported.
The company “is focused on the safety of our people in the region and will continue to support our teams in Ukraine as it values ways in which Yum Brands can make a positive impact in the region,” a spokeswoman said.
IBM Chairman and CEO Erbind Krishna wrote in a blog post last week that the company has ceased all operations in Russia. “The safety and security of IBM employees and their families in all areas affected by this crisis remains our top priority,” he wrote.
Last week, McDonald’s announced that it was temporarily closing about 850 restaurants in the country and would continue to pay wages to its 62,000 employees in Russia. The company said it could not yet determine when it would be able to reopen its branches in Russia and was considering whether further steps might be needed.
The closure of the restaurants is expected to cost the company about $ 50 million a month in salaries, contracts, supply chains and other costs, McDonald’s said.
Procter & Gamble, maker of Pampers diapers and Crest toothpaste, said it would stop spending money on capital investments in Russia, advertising and promotion and would sell in the country only products designed for basic health, hygiene and personal care. The company said that Russia and Ukraine together account for less than 2% of annual revenues. The company said it employs 2,500 people in Russia.
– Sharon Trelp participated in the preparation of the article.