After the outbreak of the Russian invasion of Ukraine, many Western companies found themselves “caught between commercial interests and moral considerations.” Not everyone followed the sanctions regime imposed on Russia.
Paints, medicines, cosmetics, clothing and other products from Western brands are still available, albeit in a smaller range, in Russian stores.
Two and a half years after the start of the large-scale invasion of Ukraine by Russian troops, the landscape of the commercial space and the range of products available have changed significantly, but not all companies have wanted to keep up the sanctions regime.
Some have announced it openly, like Auchan, for example, which justified its decision with “humanitarian considerations“, but who has since been accused of “assisting the Russian military campaign in Ukraine“.
Others said they tried, but failed due to the difficult conditions of selling the company to Russian investors and franchisees close to the Kremlin, which some observers do not hesitate to compare to blackmail, such as an obligation to sell with a discount of 50% compared to the market value. Moreover, some of these “starting conditions” – such as “voluntary” contributions to the Russian budget, around 10% of the sale – can be assimilated to the financing of the war and therefore subject these companies to new sanctions. ‘West.
Finally, there are others who “work around” the problem, by changing their brand name or sourcing route and opening representative offices in third countries.
Tikkurila or Tikkivala?
On September 24, it became known that the paints of the Finnish manufacturer Tikkurila, produced at Russian factories, will be sold under the new Tikkivala brand from next year. This was announced by the Russian subsidiary of Tikkurila Ltd.
“I don’t care at all what name is on the box“says Igor, a Muscovite who, together with his wife Irina, chooses materials for renovating their apartment. – I like the quality and the colors. Sanctions? But Tikkurila stayed with usuntil today, right? Hopefully nothing will change with the new name“.
Ordinary consumers, but also Russian companies, appreciate Finnish paints, including those related to the defense industry. In particular, it is known that in 2024, Tikkurila Oyj participated in a tender to supply its products to NPO Almaz, which is involved in the production of modern air defense systems.
The owner of Tikkurila Oyj, the American giant PPG Industries (PPG.N), has repeatedly stated that it is trying to leave Russia from June 2022.
In a statement in February, Tikkurila said it complied with all sanctions and was not able to influence operational decisions made by its Russian subsidiary.
At the same time, the company undoubtedly also preferred to keep quiet about the fact that its turnover on the Russian market in 2023 amounted to 10.4 billion rubles and net profit at 3.4 billion rubles (nearly 95 and 32 million euros, respectively).
According to Ekaterina Balon, Director of Marketing and Innovation of Tikkurila Ltd, after the rebranding, both paint and varnish manufacturing sites in St. Petersburg will continue production. It is not yet clear to what extent the quality will remain the same after the announced departure of the Finnish parent company, taking into account the inevitable revision of standards and controls, as well as raw material suppliers due to sanctions.
Another manufacturer of paints and varnishesAkzoNobel, based in the Netherlands, also announced changes to its operations in Russiabut did not leave the country.
“Following Russia’s massive invasion of Ukraine, AkzoNobel proposed severing ties with its Russian subsidiaries….. According to them, whatever remained of the Russian business would be managed locally.
But we found the opposite: AkzoNobel’s operations and profits in Russia increased after the invasion, in part because AkzoNobel continued to send raw materials to its factories in Russia.The company also continued to invest in the development and marketing of new products, although it had stated that it no longer wanted to do so after the invasion.“, explains Stefan Vermuelen, Dutch investigative journalist.
The Insider publication goes further and claims that many paint and varnish components from Western manufacturers are “used by Russian security forces“, especially in the occupied Ukrainian territories.
In response to questions from EuronewsDorinda Berkman, head of press relations at AkzoNobel, emphasized that the company “never announced that it would cease its activities in Russia, but has reduced a significant part of its activities in that country“.”As reflected in the official statement, AkzoNobel complies with all applicable sanctions regimes” added Ms. Berkman.
IThere is no doubt that many Western companies are “taken between commercial interests and moral considerations” since the outbreak of war in Ukrainenotes Stefan Vermeulen.
“The commercial interest (of AkzoNobel) was to stay in Russia, because it is a very profitable subsidiary…. But in the Netherlands, as in other Western countries, public opinion called on multinationals to leave Russia due to military aggression in Ukraine. AkzoNobel therefore chose to publicly declare that it was no longer very active in Russia, and to privately protect its business interests in the country as much as possible, without violating (…) sanctions. We are seeing a similar split in other Western companies“.
What is the situation on the Russian market?
According to the Russian business daily Vedomosti, a total of 9,600 Western companies left Russia in 2022 and in the first eight months of 2023. At the same time, the activity of residents of China and the CIS countries increased.
Large local retailers, such as MFK JamilCo, are acquiring assets and franchisees following the decision of a number of companies to leave Russia.
The New Balance, Lee, Timberland and DKNY brands thus came under its control in Russia. In this case, the names are changed, preferably so as not to stray too far from the past and the known. “New” brands must also look for new suppliers, most often in the direction of China and Turkey rather than Bangladesh and India.
This explains the increase in product prices, as is the case for the new Motherbear brand, which emerged instead of the famous British children’s goods brand Mothercare. However, on some Russian online sales sites, children’s items are still sold under the Mothercare brand.
The possibilities to continue business in Russia is largely due to the fact that the companies have been allowed to provide professional services to their own subsidiaries in Russia, but are prohibited from providing the same services to other companies.
But, in December 2023, the European Commission announced that from 2024, this exemption would no longer apply. And very recently, on September 24, Brussels, after numerous reports and information on loopholes allowing circumvention of the sanctions regime against Russia, published a directive aimed at better controlling violators.
However, the Financial Times quotes David Laurello, a partner at the law firm Covington & Burling, who believes that “regulators and businesses would do better to focus on combating Russian strategies to acquire prohibited goods (for war) and hide assets, hit by sanctions“.
Shoud I stay or should I go?
But there are also large European companies which haveofficially refused to cease their activities in Russiadespite calls for a boycott and the numerous media attacks.
The chemical-pharmaceutical giant Bayer notably explained its decision to maintain its essential activities in Russia and Belarus. Bayer indicated that it would not refuse “to the civilian population with essential medical and agricultural products“because that”would only multiply the impact of the ongoing war on human lives“. This position was also reflected in a European Commission document a year ago.
The French company Yves Rocher, one of the first among its peers to enter the Russian market in the early 1990s, has not closed any of its stores in that country. While condemning”the invasion of Ukraine“, the management of the Breton group”is convinced that its employees in Ukraine and Russia should not have to pay the consequences of the military and political decisions made by their leaders.This is why the Rocher Group has decided not to leave its divisions in Russia, where it has been present for more than 30 years.”having received”authorization from the French Treasury until September 2025“. This is how Raphael Abensour, principal consultant at Backbone Consulting, which represents the Rocher Group, commented on the company’s policy.
The choice between moral principles and profit, between sympathy for the average consumer and collective responsibility is made by each company in the face of sanctions. Some believe that in this cacophony, the new European Commission will certainly have to decide in the near future.