Turning a Western Boycott into a Lucrative Opportunity: Putin’s Strategy

Mr. Putin’s Economic Counterstrikes and Western Exits

Mr. Putin’s Economic Counterstrikes and Western Exits

Fortifying Support and Blunting Western Isolation

Mr. Putin’s economic counterstrikes have successfully fortify support among the elites profiting from the war and blunted the effects of Western isolation. While Ukraine focuses on short-term imperatives like shoring up international support, the resilience of the Russian economy has allowed Mr. Putin to play a long game.

The Micromanagement of Exits

Previously undisclosed documents, financial statements, and interviews with deal makers in Russia and Europe reveal that Moscow now micromanages practically every exit. Companies must navigate an opaque system to obtain approval for selling. In some cases, Mr. Putin’s friends have directly appealed to him to intervene.

The Resilience of the Russian Economy

The relative resilience of the Russian economy has allowed Mr. Putin to confidently play the long game. Despite Western companies leaving Russia, the Russian economy remains intact and has proven to be resourceful in filling the gaps left by their departure. Mr. Putin scoffs at the notion that leaving will hurt, stating that “Russian companies took over and moved on.”

Russia’s Image as a Business Pariah

The wave of departing companies has sent a global signal that Russia is a business pariah. The economy is strained and at risk of overheating. Mr. Putin’s handling of Western departures has only reinforced Russia’s image as a dangerous place to do business. Even top Russian officials acknowledge that decreased competition and foreign investment will have long-term negative effects on everyday Russians and the economy.

The Threat of Intimidation and Force

Hanging over the exit process for Western firms is the threat of intimidation and force. The Russian authorities have investigated departing companies, interrogated workers, and even arrested local executives. Effective state seizures have resulted in companies losing control of their operations.

Mr. Putin’s Financial Rejoinder

When President Biden claimed that the West was crushing the Russian economy, Mr. Putin was already preparing his financial rejoinder. He restricted the movement of money abroad and introduced a requirement for companies from “unfriendly nations” to obtain approval before selling their businesses, effectively putting the brakes on Western executives faced with pressure to accelerate.

Corporate Boycotts and Severing Russian Ties

In response to pressure from shareholders, Ukrainian activists, and consumers, some Western executives quickly announced their intentions to leave Russia. Corporate boycotts and efforts to sever Russian ties gained traction. The question of who would end up with these companies was of little concern, as long as renowned global brands withdrew their endorsement.

The Hurdles Erected by Mr. Putin’s Government

Mr. Putin’s government began erecting hurdles for Western companies looking to exit Russia. The Russian Trade Ministry sent a letter to local managers of the German hardware store chain OBI, urging them to defy the company’s decision to close its stores. The authorities demanded that OBI officials testify about their plans, and the company faced a days-long cat-and-mouse game between local employees and executives in Germany. OBI ultimately sold its Russian operations for a symbolic price, but the new owners changed multiple times, highlighting the lack of control Western companies have over who ultimately takes over their businesses.

The Changing Landscape and Shifting Ownership

Diplomats and experts agree that it is too early to fully understand the changing landscape of business ownership in Russia. The new owners of some businesses might not be known for years, if ever. The redirection of ownership highlights the power of those in control and the lack of influence Western companies have in these transactions.

The Government’s Power to Dictate Buyers

In June, the Russian government demonstrated its power to dictate who buys Western companies in Russia. The sale price of the Kinross gold mine was cut in half, and the buyer later faced blacklisting by British officials. This exercise of power by the government to control private transactions suggests that they will continue to do so in the future.

Read More of this Story at www.nytimes.com – 2023-12-17 11:33:53

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