Will US companies return to Russia? The impact of sanctions and market changes

Over 1,000 companies, including McDonald’s, Renault, and Henkel, left Russia, either by selling assets, ceasing operations, or being forced into sales after their assets were seized.

In the wake of Russia’s invasion of Ukraine, a large number of Western companies, from McDonald’s to Mercedes-Benz, have exited the Russian market, resulting in losses amounting to $107 billion. The question now arises whether US companies might return, depending on potential changes to Western sanctions, as discussed during high-level US-Russia talks, according to Reuters.

Who exited and how? 

Over 1,000 companies, including McDonald’s, Renault, and Henkel, left Russia, either by selling assets, ceasing operations, or being forced into sales after their assets were seized. Some companies, such as McDonald’s and Renault, negotiated options to repurchase their assets, while others, like Procter & Gamble and PepsiCo, stayed on humanitarian grounds, supplying essential goods.

Which companies may return first? 

Companies not affected by sanctions, such as retailers and food producers, are most likely to return. Dmitriev, head of the Russian Direct Investment Fund, predicts US companies could start returning as early as the second quarter. Some expect US oil companies to return to Russia once sanctions soften. However, financial services like Visa and Mastercard remain suspended, though there is speculation that these companies could resume operations soon.

Why would companies not return? 

Many companies that left Russia did so on moral grounds, condemning Russia’s invasion of Ukraine. Returning could risk reputational damage, particularly if a peace deal involves concessions from Ukraine, such as the loss of territory. Companies involved in sensitive sectors like defence-related technology are also restricted by Western sanctions.

Sectors still off-limits 

Western sanctions prohibit the supply of goods for both civilian and military uses, including aircraft, semiconductors, telecom equipment, and electronics. Despite ongoing talks between the US and Russia, there have been no solid proposals to ease sanctions yet. The European Union’s 16th sanctions package, meanwhile, continues to tighten restrictions.

How has the Russian market changed? 

Brands like Starbucks and McDonald’s have been replaced by Russian imitations. McDonald’s now operates under the name Vkusno & tochka (Tasty & That’s It), and Starbucks has been rebranded as Stars Coffee. Western carmakers face significant competition from Chinese brands, which have seen their market share soar to over 50 percent.

Would Western companies be welcome? 

Russia has seized assets from Western companies, viewing them as retribution for what it sees as the illegal confiscation of Russian assets abroad. With Russia now managing some foreign companies and ramping up asset seizures, convincing Western companies to return will likely be a slow process, as many were forced to sell at steep discounts.