Don’t read too much into MNCs' boycott of Russia

BP, Shell, Apple Inc, Ford Motor Co., H&M, Ikea and Dell Technologies are among the many Western MNCs that have announced their decision to retreat from Russia. (Illustration by Suneesh K.)

The Russian invasion of Ukraine is forcing several multinational corporations (MNCs) to reconsider their traditional decisions to remain apolitical in such situations. BP, Shell, Apple Inc, Ford Motor Co., H&M, Ikea and Dell Technologies are among the many Western MNCs that have announced their decision to retreat from Russia following the lead given by their political leadership.

Their actions have taken various forms. Auto companies like General Motors, Volvo and Volkswagen have stopped selling their cars in the country while Apple went a step further, stopping sales of its iPhones but also limiting access to Apple Pay, while banning Russian apps that it believes spread propaganda. Others like Exxon Mobil Corp. and Boeing have said they are halting operations at ongoing projects in the country. Most telling perhaps is the action of Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, which has said it would divest shares of 47 Russian companies and Russian government bonds.

While these decisions are partly driven by the need to make a statement against Russia’s aggrandizement, there is also the problem of keeping operations in the country running in light of the stringent sanctions on a range of financial transactions.

Supporting the Indian government’s neutral stance on the issue, none of the 300-odd Indian companies registered in Russia, have so far talked about a pullout while others doing business with the country have also chosen to maintain a stoic silence. ONGC Videsh, for instance, is part of a consortium along with Russian state-controlled oil producer Rosneft, Japan’s SODECO and Exxon, that runs the massive Sakhalin Island development in Russia’s Far East. The U.S. oil giant which owns a 30 percent stake in the project has already said it is taking steps to exit from the consortium. No such defiance is expected of ONGC.

Between the seeming apathy of companies from countries like India and the aggressive response of Western multinationals, lies an issue that is increasingly the subject of discussions in boardrooms and business schools. Should social responsibility to the larger pool of humanity override a company’s concern for its immediate stakeholders - shareholders, employees and customers? After all when a company shuts down an outlet in Russia, the brunt of the fallout is felt by its employees there as well as customers of its products. It almost seems that they are being punished for the actions of the Russian government under Vladimir Putin, even though they may not agree with him.

While the battle in Ukraine has given the issue an immediacy and a context, it has been festering for a while and extends to many other theatres of war. Last month ice cream maker Ben & Jerry's was sued by its longtime Israeli manufacturer on grounds that the company, owned since 2000 by Unilever, had illegally severed their 34-year relationship. Last year Ben & Jerry’s had stopped sales in Israeli-occupied Palestinian territories stating that it was inconsistent with its values.

The moot question is whether these MNCs are being driven by morality and ethics or purely by self-interest, weighed by the reputational and financial risks of doing business with Putin’s Russia. After all this isn’t the first such invasion by Russia nor is it the only country pursuing imperialist ambitions. China has been making aggressive moves in the South China Sea for years and also infiltrated into Indian territory. Somehow, that hasn’t inspired the same kind of reaction from global corporations.

Russia isn’t the first superpower to lay siege to another sovereign nation on the plea of protecting its own interests. The US invasion of Iraq in 2007 under the specious plea of looking to destroy its weapons of mass destruction (WMDs) or its 18-year siege of Afghanistan were hardly motivated by protection of the rights of citizens in those countries. Yet we didn’t see any such move by large corporations to censure the US government even after the claim of Iraq harboring WMDs was shown up to be a complete fabrication.

Global corporations have enormous powers of persuasion. Their investments bring much needed jobs to economies and the threat of a pullout by them can often act as a more potent force than diplomacy. But a lack of consistency and a question mark on their real motives, tend to dilute their potency.

Also read: Russia Ukraine conflict: The case for atmanirbharta