Putin's economic retaliation has helped bolster support among war-benefiting elites and mitigate the effects of Western isolation. While Ukraine is preoccupied with short-term needs such as bolstering international support, the relative resilience of the Russian economy has allowed Mr. Putin to play a long-term game.
Previously undisclosed documents, financial reports and interviews with dozens of dealmakers in Russia and across Europe – many of whom spoke on condition of anonymity for fear of retaliation – show that Moscow now manages virtually every exit down to the smallest detail. Companies have to navigate an opaque system to get approval to sell. In some cases, Putin's friends have directly called on him to intervene.
“Those who leave will lose their position,” Dmitry S. Peskov, the Kremlin spokesman, told The Times. “And of course their property is purchased at a significant discount and taken over by our companies who are happy to do that.”
Nevertheless, the wave of exiting companies has increased. It has sent a global signal that Russia is an economic pariah. The economy is tense and at risk of overheating. Putin's handling of migration from the West has only reinforced Russia's image as a dangerous business location. Even some senior Russian officials admit that reduced competition and foreign investment will hurt Russians and the economy in the long run.
The Kremlin says it prefers the companies remain in Russia. But Mr. Putin scoffs at the idea that leaving would hurt. “Did they think everything would collapse here? Well, nothing like that happened,” he said this month. “Russian companies have taken over and moved on.”
“Zamestim,” Russian for “We will replace,” made from the logos of Western companies at an exhibition in St. Petersburg, Russia, in April 2022. Aleksey Smagin/Kommersant, via Alamy
Not every deal is a stroke of luck. Some buyers face major obstacles to making their new business profitable.
The exit process of Western companies is threatened with intimidation and violence. Russian authorities have investigated moving companies, interrogated workers and arrested local executives.
Last summer, Putin seized the Russian arm of Danish brewer Carlsberg along with about half a billion dollars in cash and temporarily placed it under the control of one of his friends.
At least four other companies have also lost control of their operations this year due to effective government seizures.
Today, Mr Putin is at the forefront of a difficult exit process that is to Russia's advantage. But it began in the first days of the war with the primary goal of simply keeping the Russian economy alive.
Blocking the exits
Two weeks after the invasion, President Biden boasted at the White House that the West was crushing the Russian economy. “The list of companies and international corporations leaving Russia grows longer every day,” he said.
Things looked bleak for Mr. Putin. The Moscow stock exchange was closed and the ruble had crashed. If Russia were to lose all jobs, production and cash from Western companies, the impact would be devastating.
But Mr Putin was preparing his financial rejoinder. He restricted the movement of money abroad and required companies from “unfriendly countries” to obtain approval before selling their businesses.
Mr. Putin hit the brakes just as Western leaders were under pressure to speed up. There has perhaps been no louder figure in the United States than Yale University management professor Jeffrey Sonnenfeld. He appeared on cable news shows and criticized companies that remained in Russia.
Jeffrey Sonnenfeld, a management professor at Yale University, will testify before the US House of Representatives Committee on Financial Services in 2022. US House of Representatives Committee on Financial Services
Professor Sonnenfeld recalled that it was corporate boycotts rather than sanctions that contributed to the abolition of apartheid in South Africa. He turned his office into a kind of war room, where a Yale team evaluated companies on their efforts to cut ties with Russia.
The question of who would end up at these companies was of little importance.
“If Putin thinks he can be better in the fryer, then let him be there,” he said in an interview. “We really don’t care. It is important that you do not receive the support of a renowned global brand.”
Professor Sonnenfeld's list and similar lists increased pressure from shareholders, Ukrainian activists and everyday consumers.
Some executives worried what would happen to their Russian employees, factories and technology if they left. Others were reluctant to abandon their investments because a war might be short-lived.
But some quickly announced their intention to leave. Heineken and Carlsberg said they would leave once they found buyers. Canadian gold miner Kinross did the same, announcing within days a $680 million deal to sell its Russian operations to a local buyer.
OBI, a German hardware store chain, went a step further and announced that it would close all 27 stores in Russia until it found a buyer.
However, Putin's government was already building hurdles.
On March 17, 2022, the Russian Ministry of Trade sent a letter to local OBI managers. The letter, reviewed by The Times, urged managers to defy the company and keep stores open, citing consumer protection laws. There is no “economic reason” for the closure, the ministry wrote.
OBI, the ministry warned, must fulfill “obligations to its consumers, employees and counterparties, including suppliers.” That set off a days-long game of cat-and-mouse, with local employees trying to reopen stores and executives in Germany trying to prevent it.
Russian authorities also demanded that OBI officials testify about their plans. Prosecutors visited a store and inspected its computer system, the company told the Times.
In the spring, OBI struck a deal and eventually sold it for the symbolic price of a few dollars.
A closed OBI branch in Moscow in 2022. The company's Russian business was finally sold for the symbolic price of a few dollars. Maxim Shemetov/Portal
The buyer, a businessman named Josef Liokumovich, passed the company's background checks and was not on a financial blacklist. But as OBI soon learned, Western companies have no control over who ultimately takes over their operations.
In less than a year, OBI's Russia business changed hands four times, eventually ending up with associates of Russian Senator Arsen B. Kanokov, who was subject to U.S. Treasury sanctions. At some point, an ally of Chechen leader Ramzan Kadyrov appeared in the property register.
Such a realignment is why diplomats and experts say it is too early to understand the changing landscape. The true new owners of some companies may not be known for years or at all.
“These guys,” said Urszula Nartowska, OBI’s top lawyer, “have the power of what they want to take. And you have to accept that.”
In June, the Kremlin showed what companies could expect: Moscow approved the sale of the Kinross gold mine, but with a stunning change. The sale price was halved to $340 million.
A complex at a gold mine in the Russian Far East in 2012, when it was still owned by the Canadian company Kinross. Elena Chernyshova/Panos Pictures, via Redux
The buyer, Highland Gold, was later blacklisted by British officials, who said gold represented a “significant source of revenue for Russia's war effort.”
“The government has realized that it can dictate who buys and potentially use that power to reward connected buyers,” said Alan Kartashkin, a lawyer at Debevoise & Plimpton who spent decades in Moscow and about the exit of Western companies negotiated.
“I remember thinking,” Mr. Kartashkin added, “once they feel they have the power to control completely private transactions in which the government has no equity stake, they are not going to stop.”
“This business is already Russian”
There was a celebratory mood in July when Russian Industry and Trade Minister Denis V. Manturov appeared at an elevator factory in St. Petersburg.
The factory most recently belonged to the world's largest elevator company, Otis Worldwide, based in Connecticut. Now it belonged to a company controlled by Armen M. Sarkisyan, who had made a fortune running the Russian lottery thanks, among other things, to government connections.
Mr. Manturov boasted that Moscow had made special arrangements for the sale. He raved about a new production line and strong demand for elevators in Russian high-rise buildings. “This business is already Russian,” he said. It was now known as a meteor.
From left: Armen M. Sarkisyan of S8 Capital; the Governor of St. Petersburg Alexander D. Beglov; and Denis V. Manturov, Russia's trade minister, visits an elevator factory in 2022, in a photo published by Russian state media. Alexander Demianchuk/TASS, via Imago Images
Mr. Sarkisyan is an example of a unique creation of war: a businessman who was politically connected enough to win such a prize and rich enough to close the deal — but not so closely tied to the Kremlin as to attract international sanctions was exposed.
Mr. Sarkisyan and others captured large swaths of their markets almost overnight.
When Finnish elevator giant Kone tried to sell to its employees, authorities rejected the deal. Once again, Mr. Sarkisyan's holding company, S8 Capital, became the buyer.
S8 Capital also entered the tire business, buying the Russian branch of German company Continental before buying leading Russian tire maker Cordiant and entering into talks to buy the Russian factory of Japanese tire maker Bridgestone.
S8 Capital did not respond to requests for comment.
The St. Petersburg elevator factory was owned by Otis Worldwide, but companies affiliated with S8 Capital purchased the company. It's now called Meteor. Aleksey Smagin/Kommersant, via Associated Press
By the summer of 2022, the Russian economy had stabilized, the ruble recovered and Mr Putin's strategy changed.
While at the start of the war companies like McDonald's had sold to local managers or local business partners, with the option to return to Russia later, such deals soon became more difficult.
After overcoming the crisis, the government wanted to do more than just keep the doors open. It increasingly wanted to dictate the terms of any deal.
In August of that year, Mr. Putin issued a decree requiring companies in key industries to obtain his signature before selling their Russian assets. Numerous companies, including divisions of Siemens and Caterpillar, were suddenly exposed to the whims of Mr. Putin himself.
“The government started to tighten the process and it became more and more difficult,” said Laura Brank, a lawyer at Dechert who helps Western companies exit. “I told customers that we should act quickly.”
The Subcommission
Most companies trying to leave Russia operate out of a gray government building near Red Square. Eleven days after the start of the war, Putin set up a special “subcommission” there to examine sales requests.
Mr Putin's long-time finance minister, Anton G. Siluanov, heads the subcommission, which includes representatives from the Kremlin, the central bank and key ministries.
They decide whether and under what conditions companies can leave.
Once a company completes a deal with a buyer, negotiations often begin again – this time in secret, between the buyer and one of Russia's government ministries. The seller is largely excluded. According to lawyers, this process often ends with a lower sales price and sometimes a new buyer. The deal then goes to the subcommission. Sometimes deals fail after months of silence.
Internal minutes reviewed by The Times show the subcommittee is scrutinizing even the smallest details. At a meeting last year, the board approved the sale of a tiny apartment owned by Finnish tire maker Nokian for $59,000.
The subcommission has enormous power. The minutes show that the company rejected a proposal from American electronics giant Honeywell to sell its factories until an assessment showed the Russian buyer received a 50 percent discount.
Despite the bureaucracy, businessmen have fought behind the scenes for the most lucrative assets, often turning directly to Mr. Putin.
Some of the beneficiaries
Vladimir Pontanin
President of Interros, which bought Société Générale's assets in Russia.
Leonid Michelson
Chairman of Novatek, which bought energy holdings from Shell and TotalEnergies.
Timati and Anton Pinsky
A rapper and a restaurateur who are among the new owners of local establishments Starbucks and Domino's Pizza.
Ivan Tavrin
Russian investor behind Kismet Capital who has invested in Henkel, Avito and Melon Fashion Group.
Armen Sarkisyan
Businessman behind S8 Capital, which bought the operations of Otis, Kone, Continental and Bosch.
This was the case in the summer of 2022, when Mondi, a British-Austrian paper company, found a buyer for one of Russia's largest factories and sought government approval to sell.
When the deal was struck, one of Mr. Putin's old KGB friends, Sergei V. Chemezov, appeared. He wrote a letter urging the president to turn the mill toward a group of investors, including the state-owned company he runs. He even suggested a way to structure the agreement to circumvent Western sanctions. The Times reviewed a copy of the letter.
Neither Mr. Chemezov nor the state-owned company responded to requests for comment.
Mr. Chemezov's deal never materialized, but neither did Mondi's original agreement. The subcommission placed the mill in the hands of a Moscow real estate developer for significantly less than the original price.
Abroad, Professor Sonnenfeld and others kept up the pressure. More than 200 companies received an “F” grade on his list. Professor Sonnenfeld testified before Congress in November 2022. Staying in Russia, he said, was tantamount to supporting the government.