How the Income of Foreign Businesses in the Russian Federation has changed in 2022 and why so Many Companies still do not Leave

23 Pages Posted: 30 May 2023 Last revised: 6 Jun 2023

See all articles by Andrii Onopriienko

Andrii Onopriienko

Kyiv School of Economics; KSE Institute; Kyiv School of Economics - Kyiv Economics Institute (KEI)

Oleksii Hrybanovskyi

Kyiv School of Economics

Nataliia Shapoval

Kyiv School of Economics

Date Written: May 20, 2023

Abstract

KSE Institute investigated the results of the work of foreign companies in the Russian Federation in 2022.
Starting from February 24, 2022, many multinational companies operating in the Russian Federation, in response to the armed aggression against Ukraine, began to declare their intention to withdraw from the Russian market, cut off business ties, and stop trade operations. At the same time, some companies ignored the call to stop doing business with the Russian Federation as usual.
Even at the beginning of the full-scale invasion, the "SelfSanctions / LeaveRussia" project from the KSE Institute began to create a database of foreign firms that have their own legal entities (LLCs and JSCs) in the Russian Federation and collected key financial indicators (in particular, headcount, revenue, assets, capital, taxes paid and profit) for 2021.
In this work, we have updated the financial results for 2022 in order to look objectively at how some companies have fulfilled (and are fulfilling) their promises and to what extent the departure of foreign firms had an impact on the financial performance of Russian subsidiaries.
Key findings:
● As of May 2022, the "SelfSanctions / LeaveRussia" project from KSE counted 1850 legal entities in the Russian Federation, which respectively belong to 1350 foreign owners (each owner may own several local legal entities).
● As of May, 2023, there are financial results for 2022 (revenue, profit) only for 1700 legal entities. The revenue of these 1700 legal entities in 2022 fell by 23% - from USD 279 billion to USD 213 billion. Profit fell by 12% - from 16 to 14 billion USD.
● Companies that did not declare their intention to leave the Russian market, continuing to conduct business as usual, kept their income at the previous level. The companies that announced their intention to leave reduced their revenues by almost half. Companies that were sold to local Russian owners have slightly better financial results: perhaps trying to minimize their exit losses or due to the restart of operational activities of assets that were previously sometimes in a frozen state.
● The share of Russian business in global revenue of public companies (half, or 640 out of 1350, are public companies) fell from 3.2% in 2021 to 2.4% in 2022.

Keywords: Russian invasion, international business in Russia, sever business ties, sanctions, Russian economy, KSE, foreign business, GDP, 2022, behavior, international companies, direct business, trade ties, economy, geopolitics, decoupling, divestment strategy, Russia, globalization, financials, revenue

Suggested Citation

Onopriienko, Andrii and Hrybanovskyi, Oleksii and Shapoval, Nataliia, How the Income of Foreign Businesses in the Russian Federation has changed in 2022 and why so Many Companies still do not Leave (May 20, 2023). Available at SSRN: https://ssrn.com/abstract=4453963 or http://dx.doi.org/10.2139/ssrn.4453963

Andrii Onopriienko (Contact Author)

Kyiv School of Economics ( email )

3 Shpaka Str.
Kyiv, 03113
Ukraine

HOME PAGE: http://kse.ua/

KSE Institute ( email )

3 Shpaka Str.
Kyiv, 03113
Ukraine

HOME PAGE: http://kse.ua/kse-department/kse-institute/

Kyiv School of Economics - Kyiv Economics Institute (KEI) ( email )

3 Shpaka Str.
Kyiv, 03113
Ukraine

HOME PAGE: http://kse.ua/kse-department/kse-institute/

Oleksii Hrybanovskyi

Kyiv School of Economics ( email )

vul. Yakira, 13, 3d floor, suite 334
Kyiv, 04119
Ukraine

HOME PAGE: http://kse.org.ua

Nataliia Shapoval

Kyiv School of Economics

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