French companies remain reluctant to shut down operations in Russia

French companies remain reluctant to shut down operations in Russia

Business News / By /

PARIS (AP) – French automaker Renault is planning to pause production at its Moscow plant to ward off mounting criticism and to break up with other big French companies that have resisted pressure to continue operating in Russia after it lost in invaded Ukraine.

The company’s board of directors voted on Wednesday evening to suspend “activities at Renault’s Moscow plant.” It came hours after Ukrainian President Volodymyr Zelenskyy accused the company and others in France of backing Russia’s war effort during an emotional virtual address to parliament.

Dozens of foreign multinationals have restricted their operations in Russia amid sanctions imposed by the US and its Western allies to cripple the country’s economy.

But some French companies have been notable for their reluctance to leave the country, underscoring how often France – and its companies – pride themselves on being more independent from the US and UK when it comes to policy toward Russia. This attitude is beginning to dissipate as the war continues to advance.

France’s President Emmanuel on Thursday warned of “reputational risks” for groups operating in Russia, but said they are free to make their own decisions.

“My position is to give companies the freedom to make their own decisions. The management of the companies must judge that,” he said at a press conference in Brussels.

Hardware giant Leroy Merlin, supermarket chain Auchan and sporting goods retailer Decathlon are among the high-profile brands refusing to go out of business in Russia. French energy company TotalEnergies issued a combative statement this week, saying it would stop buying Russian oil but warning that a hasty pullout would only benefit Russian partners.

French food giant Danone said on Wednesday it is continuing local production of key dairy and baby food products in Russia and said it is committed to the Russians who rely on the company for food. Danone said it has condemned the war and suspended Russian imports, exports and investments and expects no profits from its Russian business.

“French firms are much more entrenched in Russia than US firms, so it’s more expensive to leave,” said Witold Henisz, a management professor at the University of Pennsylvania’s Wharton Business School.

That’s especially true for automakers and parts makers, whose European factories could shut down without parts made in Russia, said Henisz, who studies political risks for companies.

Henisz said French business leaders and politicians have clung to the long-standing notion that their continued engagement with countries of any political order gives France greater political and economic clout and a leadership position in Europe.

Not only French companies are feeling the heat. Swiss multinational food giant Nestlé tried to deflect criticism by saying on Wednesday it would remove some brands from Russia, including KitKat candy bars and Nesquik milkshake powder, but would continue to supply “essential groceries”.

In his address to the French parliament, Zelenskyy singled out some French companies and asked them to stop indirectly supporting the war in Ukraine through their presence in Russia.

“Renault, Auchan [and] Leroy Merlin must stop sponsoring the Russian war machine and the murder of children and women, rape, robbery and looting by the Russian army,” said Zelenskyy. “All companies must remember that values ​​are worth more than profit.”

In a tweet on Wednesday, Ukrainian Foreign Minister Dmytro Kuleba called on customers and companies around the world to boycott Renault. “Mistakes must come at a cost,” he wrote alongside an image describing the brand as “sponsoring Putin’s war.”

Partially owned by the French government, Renault had temporarily halted production at its Moscow plant at the outbreak of war, blaming logistical problems, before production reportedly resumed days before Zelensky’s French address. The plant makes Renault’s Arkana, Kaptur and Duster SUVs, as well as the Terrano model for its Japanese partner Nissan.

The automaker’s failure to ditch its Avtovaz subsidiary – which accounts for the lion’s share of the group’s presence in Russia – means it’s likely to remain under pressure. Last year alone, Renault sold almost half a million vehicles through its Russian subsidiary.

Renault said it is not withdrawing immediately, but is simply “assessing the options available, taking into account the current environment, while acting responsibly towards its 45,000 employees in Russia”.

Leroy Merlin has been more adamant than Renault and – like Auchan and Decathlon – refuses to shut down its Russian business. In a statement, Leroy Merlin’s management reiterated its desire for its Russian stores to remain open in a decision backed by French regional political leadership.

Not even the destruction of a Leroy Merlin store in Kyiv by a Russian bombardment on Sunday night was enough to make parent company Adeo reconsider its position. The Defense Ministry of Ukraine also accused the chain of indirectly financing the strike through operations in Russia.

“Maintaining our operations in Russia is a decision that is not easy,” the company said. “We have no reason to condemn our Russian teams for a war they didn’t choose,” adding that she still has “responsibility as an employer.”

TotalEnergies denied “serious and unfounded allegations of ‘complicity in war crimes'” against the company. It said sanctions linked to Russian laws governing foreign investment prevented it from finding a non-Russian buyer for its minority stakes in several private Russian energy companies.

“A reckless abandonment of these interests would enrich Russian investors, which is contrary to the purpose of the sanctions,” the company said. Competitors Shell and BP, on the other hand, quickly announced they were exiting their Russian energy projects.

TotalEnergies said it has no choice but to buy Russian LNG to supply Europe in the short term, citing the continent’s “gas logistics capabilities” and noting that it doesn’t have the same domestic resources as countries like Britain and the US dispose

French bank Societe Generale, which owns one of Russia’s largest private lenders, said this month it was “conducting its business in Russia with extreme caution and selectivity while supporting its historical clients.” The bank said its exposure to Russia was 18.6 billion euros and warned of the possibility of it being stripped of its local operations.

French companies are playing by the historical rules of a post-war order that has been turned on its head, said management professor Henisz.

“The only question facing companies is whether to get out early and look bold or be dragged to the bottom of their industry,” he said.

French companies “will have to bear the cost of looking the other way as Russia has signaled its intention to leave the international system,” Henisz added. “Your shareholders and some EU customers will suffer. It’s only a matter of time.”

Chan contributed from London. AP reporter Sylvie Corbet contributed from Paris

Follow Breitbart London on Facebook: Breitbart London