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The Marlboro Man is stuck in Russia.
Philip Morris CEO Jacek Olczak told the Financial Times Wednesday the tobacco giant has been trying for nearly a year to sell off its Russia operations and leave the country, but if it comes at a major loss to shareholders, he’d rather just “keep this whole thing.”
Smoke If You Got ‘Em
After Vladamir Putin invaded Ukraine, more than 1,000 global companies began suspending activity in Russia or selling off their assets and withdrawing from the country entirely. No more flying to Russia via Delta. Good luck finding any new Nikes or Adidas in St. Petersburg. And you know what they call a Quarter Pounder with Cheese in Moscow? They call it a Grand De Luxe ever since McDonald’s sold its operations to a Siberian chain. Paying taxes to a warmonger just ain’t a good look.
But moving out often comes at a nontrivial cost. According to Moscow’s Center for Strategic Research – a public policy think tank that is not government operated – by October of 2022, international corporations had lost roughly $240 billion as a result of cutting back or pulling out of the country. Competing tobacco company Imperial Brands took a $463 million hit after selling its Russian operations to a local partner. British American Tobacco, which is also trying to sell, said it might take till 2024 before the Lucky Strike maker can fully exit Russia without too much pain.
It’s a “bloody complex” process Olczak told The Wall Street Journal last year:
- In 2022, Russia and Ukraine accounted for 8% of Philip Morris’ revenue, totaling $31.7 billion, the FT reported, and the company has $2.5 billion worth of assets in Russia. But right now, the Kremlin dictates company valuations, and western companies can’t sell to parties under US and EU sanctions, so options are very limited.
- Plus, there’s the safety concern. As soon as businesses announce scaling back, Russian authorities start issuing summonses and threats of arresting corporate employees who have criticized the government, WSJ reported. Philip Morris has already quietly moved a few non-Russian employees out of the country.
Not as empty as you’d think: Philip Morris is the norm rather than the exception, too. While it may seem like there was a mass exodus of western companies from Russia, most have stuck around whether that was because the exit process was too tough or they just didn’t want to go. According to the International Institute for Management Development in Switzerland, less than 9% of EU and G7 groups operating in Russia had left by the end of last year.