According to people familiar with the matter, Russian prosecutors have issued warnings to Western companies in Russia, threatening to arrest corporate leaders there who criticize the government or seize the assets of companies that are leaving the country.
Russian President Vladimir Putin last week expressed support for a law to nationalize the assets of foreign companies leaving his country in connection with its invasion of Ukraine. Prosecutors’ warnings were directed at companies across sectors including technology, food, clothing and banking, people familiar with the matter say.
The warnings have prompted at least one of the targeted companies to restrict communication between its Russian business and the rest of the company over concerns that emails or text messages between colleagues could be intercepted, some people say.
Other companies have transferred their executives from Russia, according to other sources familiar with the situation.
Representatives for Coca-Cola, IBM, P&G PG -1.19% and McDonald’s declined to comment. A Yum spokesperson declined to comment on the restaurant company’s past statements about its decision to suspend operations at its KFC and Pizza Hut restaurants in Russia.
KFC works in a Russian shopping center on Saturday.
Photo: Maxim Konstantinov/Zuma Press
On Sunday, the Russian embassy in Washington did not respond to a request for comment.
A number of companies have announced plans to suspend or reduce their activities in Russia following Mr. Putin’s invasion of Ukraine and sanctions imposed by Western governments.
Many companies, especially retailers and manufacturers, have said their decision to cease operations is temporary. Some said they were caused by the disruption of supply chains due to sanctions. Others promised to leave forever.
Companies are also pricing their business in Russia differently, given economic volatility and expectations that conditions will be volatile for some time to come, people briefed on the matter say. According to people, despite warnings from prosecutors, a number of companies do not plan to change their decision to withdraw or suspend operations. It will also be difficult for companies to move operations smoothly to Russia if the government tries to impose its own managers, one of the sources said.
The Russian Prosecutor General’s Office on Friday said it would ensure that companies that have announced they are suspending or terminating operations comply with the country’s labor laws. According to the Yale School of Management, more than 350 foreign companies have announced their resignation or temporary suspension of work in Russia.
Wall Street banks like Goldman Sachs Group Inc., consumer goods companies like Coke, retailers like Levi Strauss & Co., and tech giants like Apple Inc. have announced plans to step back. Energy giants such as BP PLC and Exxon Mobil Corp. have announced they are pulling out of Russian operations.
Mr Putin backed a plan put forward last week by a senior member of his dominant United Russia party to nationalize the operations of Western companies leaving the country. Such a move would help prevent job cuts and preserve Russia’s ability to produce goods domestically, said Andrei Turchak, secretary of the general council of the United Russia party.
Washington warned against attempts at nationalization.
“Any illegal decision by Russia to confiscate the assets of these companies will ultimately result in even greater economic losses for Russia” and could lead to lawsuits, White House Press Secretary Jen Psaki tweeted Thursday.
Coca-Cola announced last week that it was suspending its operations in Russia. Coke’s business in Russia and Ukraine generated between 1% and 2% of its operating and revenue revenues in 2021. As of December 31st.
Yum restaurant owner said last week he was temporarily closing 70 company-owned KFC locations and signing an agreement with Pizza Hut franchisees to shut down 50 locations. The company also said it was suspending all investment and restaurant development in Russia.
The company is “focused on the safety of our people in the region and will continue to support our teams in Ukraine as we evaluate ways Yum Brands can make a positive impact in the region,” a spokeswoman said.
IBM Chairman and CEO Arvind Krishna wrote on his blog last week that the company had suspended all operations in Russia. “The safety and security of IBM employees and their families in all areas affected by this crisis remains our top priority,” he wrote.
Last week, McDonald’s said it was temporarily closing about 850 of its restaurants in the country and would continue to pay the 62,000 people who work in Russia. The company said it is not yet able to determine when it can reopen restaurants in Russia and will consider whether any additional steps may be required.
Restaurant closures are expected to cost the company about $50 million a month in payroll, rent, supply chain and other costs, McDonald’s said.
P&G, PG -1.19% maker of Pampers diapers and Crest toothpaste, said it will stop spending in Russia on capital investment, advertising and advertising, selling only products focused on basic health, hygiene and personal care. P&G said Russia and Ukraine combined accounted for less than 2% of annual revenue. The company said it employs 2,500 people in Russia.
— Sharon Turlep contributed to this article.
Write to Jennifer Maloney at [email protected], Emily Glazer at [email protected] and Heather Haddon at [email protected]
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