The Trump administration has sent a surprising message to corporate America. Three years later as an international pariah, Russia could once again be opened for business.
President Trump is pressured Ukraine to accept a contract to end the war. And his Secretary of State Marco Rubio said last week that he was told that if Moscow ended the war, the US and Russia would be “a potentially historic economic partnership” and “believed.” He said he could pursue opportunities that are unlikely to have been possible.
But the question is whether American companies are interested.
And while analysts and investors agreed, it wasn't.
“I don't think that big American companies will, if any, come back to Russia in a hurry,” said Carl Weinberg, chief economist in high frequency economics.
The Ukrainian invasion launched by Russian President Vladimir V. Putin in February 2022 caused sudden flights of foreign companies as the US, Europe and other countries punished sanctions and cut off most trade. did. Since then, more than 1,000 companies have left or cut their businesses, according to a database compiled by Yale Management School.
But the Russia they left is not the one where they return.
The country's war-driven economy is suffering from 21% interest rates, labor shortages and shrinking middle-class consumers.
Then there is an unpredictable business environment in a country where the rule of law can easily shape the law of the ruler. American businesses must address the risks of the Kremlin decree, which places new fees, taxes and price controls. Limit your ability to send back profits and dividends, sell assets and make administrative decisions. Grab a private company.
Last month, the government escalated its efforts to expropriate Russian-owned businesses. And on Friday, Putin declared that he wanted Russian businesses to have “specific advantages” over foreigners “returning to the market.”
There is also the possibility of further policy shifts in Washington's Russia.
“We are pleased to announce that we are a great opportunity to help you understand that we are a great source of exploration,” said Mark Walker, a senior advisor to Sovereign Advisory Practice at investment bank Lazard. And Moscow cannot trust that it will continue to receive foreign investment. “It's a difficult arrangement to do the job,” he said.
Even if the US ends up lifting all sanctions, thousands of other people imposed by the European Union, the UK, Japan and other countries could hamper supply chains and threaten the company's interests. There is. On Monday, the European Union approved the 16th sanctions package against Russia.
“The business environment in Russia is extremely difficult, the risk of expropriation is high, and the Russian economy is not exactly booming,” said Agate Demares, senior policy fellow at the European Council for Foreign Relations.
American companies that stayed in Russia do not have full control over their income and assets, Demares said. Companies considered “unfriendly” by the Kremlin often had to pay the government an additional 35% “labeled as a voluntary contribution.” Those who remained are Most are prohibited from returning to their home country.
Other Western companies such as Danone, Carlsberg and The Germany Energy Company Uniper seized their assets.
The Trump administration pursues what most analysts believe is a fantastical economic opportunity for Russia, as they target America's biggest trading partners, Mexico and Canada. US manufacturers complain that the president's threat to impose a 25% tariff on these two long-time allies causes serious harm by increasing costs and disrupting supply chains.
Of course, Russia controls vast land, oil and gas warehouses and nuclear weapons. But it was a bit of a player in the global economy. Before the military invaded Ukraine, the country was responsible for just 1.7% of the world's total production.
Trade with the US was extremely important. In 2021, exports to Russia accounted for 0.4% of the total US exports. This is roughly the same amount as Honduras. According to Yale researchers, most Russian multinational companies made only 1% of global revenue there.
“Even before 2022, the environment was already challenging, but there was money to make,” said Erina Libakova, a senior fellow at the Peterson Institute for International Economics in Washington. “Risks have increased dramatically now, but we don't have any money.”
In the 2000s, rising prices of oil gave the growing middle class Russia an appetite for foreign goods and cars. “That dynamic doesn't exist anymore,” said Libakova, who is also the vice president of foreign policy at the Kiev School of Economics.
Russia's number one export – oil and gas – competes directly with the US's own energy sector. Even the US oil company that once operated in Russia doesn't seem to be keen on making big investments there like ExxonMobil.
The US, the European Union and dozens of other countries have also severed broad financial ties with Russia. They jointly banned many Russian banks from using Swift. This is the system used to complete financial transactions around the world. And they frozen billions of dollars owned by the Russian government, but they were held at the Western Bank.
The United States, which controls global banks, could abandon this united front. Trump was able to decide to allow American banks to process the transaction again in dollars in which Russia is involved. It will remove the enormous barrier that has crippled the capabilities of many businesses doing business with Russia.
About 20 American companies, including the subway and the franchise restaurant outlet on Friday, are still doing business in Russia, according to Yale tally. Dozens of companies are operating, but have postponed new investments and banned businesses.
Companies that stay in Russia will likely end US sanctions. And Russian officials are trying to inspire America. According to Russian news agency Interfax, first deputy prime minister, on Friday, Prime Minister Dennis Manturov, said he would consider allowing Boeing to resume purchasing titanium if the company returns.
However, there remains a deterrent to reenter Russia.
Not only will it rewind the tangle of sanctions, but measures enacted by the Russian government will also become a long and complicated process. It will also sort out the legal and financial mishmash left behind by the withdrawal of foreign companies.
Mike Mayo, a bank analyst at Wells Fargo, said it is unlikely that American banks will return to Russia. “Never say it,” he said, but “Wall Street has become much more surgical about where you invest in than it has been.”
Citigroup had the largest presence in America's banks in Russia, but most of them have come out. It is unlikely that it will return, especially as most global markets have withdrawn from consumer banks. A Citigroup spokesperson declined to comment.
Many businesses still suffer losses. Pimco, one of the world's largest asset managers, saw a drop in the value of Russian bondholders by over $1 billion in 2022.
“I think there's more to be interested in restoring old investments than taking on new risks,” said Brad Sesser, an economist with the Council of Foreign Relations.
Some debt investors who have made careers by betting on dangerous results said they would soon be thinking about returning to Russia.
As Ribakova of the Peterson Institute said of Russia, “The biggest problem here is that you just can't make money.”
Maureen Farrell, Joe Rennison, Danielle Kaye and Niraj Chokshi contributed the report.
