Impact of the war for multinationals in Russia

The news about the war between Russia and Ukraine does not stop, every day we hear of new attacks on cities or see waves of people fleeing to new places to take refuge. This is the reality of the year 2022, although many times we find it hard to believe.

The other reality is that the war between two countries, or the invasion of one country to another for strategic reasons or economic interests, affects many other countries indirectly, and also affects their economies. Governments and private companies that make up the industry of each regional economy are aware of the news because this news is going to define their future.

Multinationals vs. the war

For days now we have been learning the names of multinational companies that are leaving Russia in response to the invasion that this country is carrying out in Ukraine. The multinational private companies that have large stores in this country have decided to cease their operations in response to these military actions that have been taking place for more than a month.

Large companies such as Coca-Cola, MC Donalds, PepsiCo, and many more have decided to close their production and commercial plants in the country that is invading Ukraine. Most of them announce their departure in statements where they attribute the decision to the suffering that the war is causing and taking a stand against such pain, planting a seed of rejection of this invading regime and beyond that, the consumption of residents is being modified for these issues and that, of course, economic activity is falling; they report that the main reason for withdrawing from the country is the rejection of the suffering of the Ukrainian people.

In addition to technology businesses, groceries, online services, companies such as Visa, Mastercard, and American Express have announced their withdrawal from the market and currently do not allow cards issued by entities to carry out operations outside the country, and announced that soon there will be no possibility of carrying out operations in Russia. In response to this, Russia reports that its banks will issue UnionPay cards, a Chinese company that will replace these services

The case of Levi's Strauss

One of the multinationals that decided to withdraw from the Russian market is Levi's, the textile factory and well-known jeans brand. Although, for the Russians (whether or not they are in favor of the war), the exit of all the multinational companies that until now operated in this country will be something that will have an impact in one way or another on their daily lives, the exit of this company from clothing has an extra meaning.

This clothing brand from the United States arrived in Russia in 1959 when Richard Nixon opened the "national exhibition of states" in Moscow, where there were stands of different American brands, such as Pepsi, Dodge, Polaroid, among others. But the stand that marked the fair and caught the attention of young people was Levi's jeans, where young people from the United States dressed in jeans sang folk songs for Muscovites. From then on, the brand positioned itself in Russia and its jeans became a symbol of peaceful resistance to Soviet oppression during the Cold War.

Now, with this new war breaking out, the brand has chosen to leave the country, leaving behind its Russian consumers who years before had positioned it at the top, even being one of the brands of the capitalist empire to which the Russian regime so much opposed.

Why do companies choose to leave?

Most European countries and the United States have expressed their position on this invasion of Ukraine, but the truth is that, for the invading country, there have been no concrete sanctions yet. Some countries even restrict or claim to restrict the purchase of gas and oil in this country, but there is no more response from government agencies that offer help to Ukraine. In this way, the private companies that must make decisions about their future and express their position in the face of this war, choose to withdraw from the country, thereby implying that they will not continue to operate for a country capable of inflicting such pain on another. 

Of course, positioning yourself on the front lines of the oppressive country is a very good strategy for brands, supporting the war is not well seen by most of the world's citizens, so in addition to being a policy that is related to the values that each company proclaims, is a good marketing strategy, which allows consumers to identify with the actions of each company.

Although the flight of multinationals affects the Russian economy, the truth is that this economy is directly affected by the actions that its government decides to take. The departure of these companies from the country generates unemployment and frees many workers from their jobs, but the main cause of this is still the invasion of this country into Ukraine.