Significant losses, complicated procedures and the sword of Damocles of sanctions: the Philip Morris group has failed to sell its assets in Russia. However, it is not the only company struggling with the withdrawal from the Russian market.

“It’s so damn difficult, it’s really crazy,” said Jacek Olczak, CEO of cigarette maker Philip Morris, about the company’s withdrawal from the Russian market. For several months the company has been trying to sell its assets in Russia in order to leave the country, he told the US daily The Wall Street Journal.

Like the US newspaper writes on June 21, the Russian military operation in Ukraine has “unleashed an avalanche of Western sanctions.” Many companies then “agreed to withdraw from Russia” or “to reduce their activities there”. Some companies without factories in the country have stopped supplying Russia, such as the technology company Apple. For others, on the other hand, the situation is dramatic, such as for the Philip Morris group, which, among other things, sells the “Marlboro” brand in Russia.

According to the newspaper, tobacco concern Philip Morris is one of the western companies that have a very long history in Russia. The company came to the Soviet Union in 1977 after signing an agreement with state-owned industry. Today, Philip Morris has a factory in Saint Petersburg and sales offices in around 100 cities in Russia.

“Russia was a good market,” the company’s chief financial officer, Emmanuel Babeau, said at a conference in May. “It’s a growing market,” he added.

As The Wall Street Journal writes, Russia accounted for nearly 10 percent of the company’s global cigarette and tobacco shipments in 2021 and about 6 percent of its $31.4 billion net revenue. The assets of the Russian branch amounted to around 1.4 billion US dollars (around 1.3 billion euros) at the end of March. At the beginning of this year, the company employed more than 3,200 people in Russia.

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Now the group is trying to sell its Russian assets – which is proving almost impossible. At first it was not clear which authority in Russia “would approve such a sale or what the procedure for obtaining this approval would be,” the newspaper quoted company boss Olczak as saying. Almost three months later, the tobacco company is still trying to solve the problem.

Philip Morris is not the only company struggling with such difficulties, the newspaper said. The withdrawal from the Russian market also proved problematic for the US brewing group Anheuser-Busch, which owns and distributes the Budweiser brand in Russia.

the Wall Street Journal there are other examples:

“French bank Société Générale sold its operations to Russian oligarch Vladimir Potanin, who was sanctioned by neither the US nor the EU, at a profit drop of more than $3 billion.”

“French automaker Renault sold its 68 percent stake in Russian automaker AvtoVAZ to a state-sponsored entity for one ruble and a six-year buyback option. Renault had invested billions of euros in Russia and held a nearly 30 percent market share there last year . The company also employed more than 40,000 people in the country.”

If Western companies decide to exit the Russian market, they face many challenges. These companies “cannot sell to parties subject to US or European Union sanctions,” writes The Wall Street Journal. The question of “how the value of a company can be calculated in a market that is suddenly cut off from the rest of the world” is also extremely complicated.

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The Russian government is not making it easy for companies to withdraw. The assets such as machines and similar equipment may not be exported to countries that Russia sees as hostile. The export of dividends is also prohibited.

“Pending laws in Russia could allow the government to nationalize or confiscate assets from companies that reduce production or lay off a certain number of employees,” the newspaper explains.

The anti-Russian sanctions have made life very difficult for Western companies in Russia. A recovery is not in sight.

“Global companies have lost more than $59 billion from their Russian operations and the sanctions will further weigh on the economy, according to public statements and securities documents,” the newspaper said.

More on the subject – Siemens ends business in Russia after 170 years – sanctions massively reduce profits

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.