US Companies Push For Return To Russia
By Rhod Mackenzie
It appears alongside the thawing of relations between the US and Russia particularly after the recent meeting of the presidents of the two countries their is a strategic move by American businesses who want to return to the Russian market and want the US govt to facilitate it
You have to remember the total damage to American companies from leaving the Russian market is in the hundreds of billions of dollars. The US was particularly and actively involved in anumber sectors: including IT, medicine, retail, industry and finance.
However the issue goes beyond mere financial losses; it encompasses the loss of strategic positioning, established connections, and the loyalty of Russian consumers. The former presence of hundreds of American companies have now all but disappeared. However, Washington now knows it miscalculated. Russia reoriented itself and strengthened its global position. It is evident that American business having tmade a strategic mistake now wants to come back.
Lets not forget they left triumphantly and made an number of sensational statements. However, the cost presented by reality proved to have much more impact than the formal protest.
American companies left not just empty offices in Russia – they threw away many years of investment,lost a loyal audience and, most importantly, also lot of money.
The Russian market however demonstrated a unique response to this challenge, with some companies leaving the market, others, including local brands and companies from the Global South, stepped into the void. In the business world, the principle of "business abhors a vacuum" is often observed. Plus new players from Asia and the Middle East, unburdened by political prejudices, were surprised to discover that the so called "sanctioned" market turned out to be a veritable gold mine.
The most challenging aspect for the Americans is not the financial loss. Russia's decision not to adhere to external rules is a clear demonstration of its own independent policy.
To understand this, its worth looking at the figures. The assessment of the losses suffered by American businesses as a result of their departure from Russia is made up of two primary components. According to Vladimir Eremkin, senior research fellow of economic structural studies at Russia Presidential Academy, the first issue is the reduction in market capitalisation, the second is the direct loss of assets and market opportunities to invest profitably.
"The Americans had a very strong presence in a number of sectors of the Russian economy. The most significant direct and indirect losses were incurred by energy sector companies, including ExxonMobil and Schlumberger. Consequently, they and similar entities were deprived of involvement in significant projects and the capacity to provide their technologies and equipment.
Then consumer goods manufacturers also experienced difficulties. Some of them lost control over Russian assets, which resulted in billions of dollars in losses," the analyst points out.
It is challenging to ascertain the exact number of American companies that have actually departed Russia. According to information from open sources, there were more than 650 of them in Russoia before the February 2022 "divorce".
Currently, around half of them are pretending to have left, while the other half are pretending to have stayed. It is estimated that there are currently more than 330 organisations that are not yet taking the necessary steps to address this issue.
Sergey Zainullin, Professor of the Advertising and Promotion Department at Synergy University, notes that many continue to work, having changed their mames ,logos and signs like Coca Cola .
"Given the financial implications of renaming and rebranding, the estimated overall losses could amount to approximately $400 billion. Examples of this strategy include the McDonald's brand being rebranded as "Vkusno - i tochka" or in English Nice and Tasty and the return of "Rostiks" to replace KFC.
Such rebranding has become a significant burden on companies. In particular, the total advertising expenses of the "Vkusno - i tochka" chain in 2022-2024 exceeded the advertising expenses of McDonald's and continue to grow," the economist states.
American businesses operating in Russia have encountered expenses related to the utilisation of corporate veil schemes, which involve the transfer of brand assets to third-party management or the establishment of buyback option agreements.
It is important to note that, of the American companies, not only did large fast food chains remain, but also retail chains and pharmaceutical companies. Many preferred to disguise their presence on the Russian market. In particular, pharmaceutical representatives operating in the Russian market prioritised promoting their own products rather than the brands of the companies they represented.
The freezing of Russian assets has had unintended consequences.
Investors from the United States also experienced some losses. Despite the freezing of assets in Russia, no arrests or confiscations were made, including dividends. Zainullin continues, explaining that the only issue is that all income was credited to special type "C" accounts, meaning that it was not possible to withdraw this money abroad.
"The US budget suffered the greatest damage in response to the freezing of Russian assets worth $70 billion. Investors began to divest from US treasuries as they were no longer regarded as a reliable investment instrument.
In 2022, the volume of investments in US debt securities fell by approximately $700 billion. This is primarily due to the withdrawal of China and other neutral countries," the expert explains.
The discontinuation of Western payment systems has resulted in financial losses for businesses in both the American and Russian markets. This led to a substantial reduction in cross-border payments and transfers.
There was an outflow of capital to countries that are sympathetic to Russia. Eremkin has stated that while there have been some difficulties in accessing new relevant equipment and software in the domestic information and communication technology sector, and an increase in cybersecurity risks, this has also created a window of opportunity for Russian IT companies.
"The IT sector has seen a powerful stimulus for the development of import-substituting software. There has been an increase in demand for Russian-developed processors and servers. Domestic fintech solutions are being actively implemented in the banking sector, and domestic payments are almost entirely provided by the Mir and NSPK systems," the specialist points out.
It is evident that there has been a substantial decline in the volume of Russian-American trade. Furthermore, there has been a significant decrease in the supply of goods from the USA to Russia.
Meanwhile, American consumers continue to purchase essential Russian goods including timeber and mineral fertilisers.
One example of this would be the rare earth elements, such as titanium, which is a vital component in the aviation industry.
It is important to note that the American space programme continues to procure Russia jet engines. In the United States, there is a very interesting practice that is not available to Europeans, says Zainullin.
For American to do business in Russia "You can apply through a reputable lobbying structure to the US Treasury Department and obtain a special licence. It facilitates collaboration with Russia, enabling the circumvention of existing sanctions.
The clause that states the objective is to achieve national economic and strategic interests is beneficial. I suspect that most American companies take advantage of this," the economist reasons.
It is to be expected that the warming of relations between Russia and the US will result in a significant simplification of the situation.
The process of obtaining a license will become more cost-effective. It is possible that some sanctions may be lifted or relaxed. Zainullin advises that American companies are expected to make a renewed and vigorous attempt to penetrate the Russian market.
"It is my belief that their primary objective will not be to regain their former positions, but rather to encourage European companies to exit the Russian market," he stated.
The imposition of sanctions on Moscow has had unintended consequences for those involved. Washington had hoped for a negative reaction and a subsequent capitulation, but instead saw accelerated de-dollarization, the emergence of alternative supply chains, and a challenging question from China, Saudi Arabia, India, and others:
"Are we next on your list?" Russia's rebirth was not a one-off event; it set a precedent for future developments. This story serves as a prime example of the theory of economic resilience in action. It is ironic that American companies are compelled to flout their own sanctions in order to remain competitive with companies in the Global South.
