While Western corporate titans are running from their ties to Russia, citing moral and economic imperatives, others, especially in the foodservice and resource-based industries, say they are stuck. McDonald’s, Starbucks, Papa John’s and Yum Brands – the conglomerate behind KFC and Pizza Hut – have remained silent on their plans to develop business in Russia following its invasion of Ukraine as they come under mounting pressure from social media and from big investors to leave. Russia.
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Dozens of high-profile companies, including Shell, BP and ExxonMobil, have suspended operations in response to the unprovoked attack that devastated Ukraine and drew international condemnation. But others are treading thinner lines, such as French oil company TotalEnergies, which has said it will halt new spending in Russia but keep its partnerships there, including a nearly 20 percent stake in Russian gas producer Novatek.
Meanwhile, Boeing announced on Monday that it would look elsewhere for titanium, which is used for passenger aircraft, but has not pulled out of a joint venture to produce it. Russia’s steel industry – key to electric vehicles and semiconductor chips – is so dominant that analysts suggest it may be “too big to impose sanctions.”
These steps show how deeply ingrained certain industries are in the regional and Russian economy. In agriculture, Ukraine is such a large producer of wheat that it is called the “breadbasket of Europe”. Russia is also a major grain producer.
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The Russian economy is small compared to the US economy—$1.5 trillion versus $20.9 trillion—but it’s too big to ignore. Experts say it would be like a large corporation leaving Texas.
But for economic sanctions to have the most effect, they say, Russia’s financial isolation must exceed what Western governments might impose and make corporations feel that operations in Russia are dangerous both to their public image and to their balance sheet.
“The financial implications will not affect the market or the specific price of their shares,” said Gary Kalman, director of US financial corruption group Transparency International. “I do think the reputational threat is more in terms of people’s perception.”
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Some of these corporations are generating interest on social media and from institutional investors. On Twitter, activists circulated lists of brands that should be boycotted as they continue to do business in Russia, including McDonald’s, Coca-Cola, PepsiCo, Yum Brands and Starbucks restaurants.
McDonald’s owns the vast majority of its more than 900 locations in Russia and Ukraine, although since Russia’s annexation of Crimea in 2014, it has sold 15 percent of them to franchisees.
But other food brands do not have as much control over their operations in Russia. Most Starbucks, Papa John’s, KFC and Pizza Hut establishments in Russia are owned by franchisees, which limits the ability of corporations to curtail their activities.
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Representatives for McDonald’s, Coca-Cola, PepsiCo, Yum Brands and Papa John’s did not respond to requests for comment.
Starbucks CEO Kevin Johnson wrote in a letter to employees on Friday that the company’s 130 Russian stores are “fully owned and operated by a licensed partner.” Johnson said the company would donate royalties it receives from its Russian business to humanitarian efforts in Ukraine.
It was just as difficult for the heavier industry corporations to withdraw completely from Russian markets. Chicago aerospace giant Boeing depends on Russian titanium for things like fasteners and landing gear used in commercial jets. Titanium parts are also widely used in aircraft engines.
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On Monday, he suspended all titanium purchases in Russia. It says it has enough stock to continue aircraft production without Russian help in the short term.
But Boeing declined to comment on the future of its investments in Russia, including a titanium production joint venture established more than a decade ago. The company confirmed this relationship as recently as November, when it signed a memorandum of understanding with the Russian company VSMPO-AVISMA, which calls itself the world’s largest titanium producer. The company is led by Sergei Chemezov, who is often described as a close associate of Russian President Vladimir Putin.
“Our reserves and diversity of titanium sources provide adequate supplies for aircraft production, and we will continue to take the right steps to ensure long-term continuity,” Boeing spokesman Paul Lewis said in an emailed statement.
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TotalEnergies chief executive Patrick Pouyanne said at an energy conference on Monday that his company would not abandon its ties to Russia because of Europe’s dependence on natural gas imports.
Pouyanne said the company has not faced pressure from authorities in France, which uses much less natural gas than other Western European countries, to sever ties with Russia.
“Obviously I have had talks with the highest authorities in my country and they are not pushing us to leave Russia,” he said, according to Reuters.
At least one major public institutional investor has urged corporations doing business in Russia to rethink their operations. On Friday, New York State Comptroller Thomas P. DiNapoli wrote to 10 companies with state pension fund investments, including McDonald’s, PepsiCo, Mondelez and Kimberly Clark, urging them to reconsider their involvement in the Russian markets.
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Together, retired New York public employees own $1.6 billion in corporations, including a $501 million stake in PepsiCo and $410 million in McDonald’s.
“We believe that companies that continue to operate in Russia and invest in Russian assets face significant and growing legal, regulatory, operational, human rights, human resources and reputational risks. In addition, due to the unpredictability of the situation and the possibility of worsening conditions, companies must ensure that assets are not stranded or otherwise burdened with sanctions,” DiNapoli wrote.
Maryland Comptroller Peter Franchot on Monday welcomed American companies that have ceased operations and partnerships in Russia and called on US law firms, lobbying groups, real estate developers and accounting firms that work with the Kremlin or Russian entities to cut off their ties.
“The most effective way to stop Putin from his unprovoked invasion of Ukraine is to hit his wallet and his oligarchic collaborators,” Franchot said in a statement. “… We are not going to interfere in military operations, so we must make every effort to weaken them economically and financially.”
Jeanne Whalen contributed to this report.