Apple suspends sales in Russia and disables services of its maps applications in Ukraine to prevent the invader from using them; Facebook and Google restrict access to Moscow’s propaganda channels in the European Union; Walt Disney, Sony Pictures and Warner Bros state that they will not screen their latest releases in the aggressor country; energy companies BP, Exxon Mobil and Shell announce divestments in Russia; H&M stops selling its clothes in Russian stores… the big companies have revealed themselves in this global crisis unleashed last week as economic actors with the capacity to impose their own sanctionsan unprecedented step that has to do -according to the experts- with reputational calculations of these companies (but also with their income statements), and which is happening now because the deepening of globalization makes possible and effective measures that only a few years were unthinkable.
“A few years ago you couldn’t cut off, for example, your streaming television service to Russia simply because there were no streaming services“, summarizes Federico Steinberg, main researcher at the Elcano Royal Institute and professor at the Department of Economic Analysis at the Autonomous University of Madrid. “Trade sanctions [tradicionales] they have a smaller and slower effect, but the globalization of finances and services is allowing an immediate and harsh impact of measures that were not feasible before,” he says, pointing to another example of speed and forcefulness, the paralysis of the Bank’s assets Central Bank of Russia and the expulsion of several Russian entities from the SWIFT interbank communication system, which have already caused the bankruptcy of a subsidiary of a Russian bank and the collapse of the ruble.
Reputation and calculation
But in addition to being able to impose sanctions, one must want to do so, and in this case the desire to shore up brand reputation it is one of the main factors that push companies to action, according to experts: “it is a combination of the moral obligations that companies feel and the wishes of their clients, communities and governments,” he explains to El Periódico de España, newspaper of the same group, Prensa Ibérica, as this newspaper, Matthew Jackson, recently named the Frontiers of Knowledge Prize in Economics by the BBVA Foundation. This specialist in network theory adds that “reputation and good consideration can be very powerful when it comes to motivating companies, especially those whose business depends on relationships with their consumers.”
The business decision to adopt sanctions has a lot to do with the fact that “the step taken by Russia is very serious; there is no ambiguity or gray area, there are no maneuvers here by soldiers without a flag or insignia [como sucedió en 2014 en Crimea], Russia is positioned as an aggressor“, explains Ángel Saz-Carranza, director of the Esade Center for Global Economy and Geopolitics (EsadeGeo); therefore, for this expert, the company’s reputation plays a non-exclusive role, but it is important: “the company does not want to face its domestic market, which is against invasion.” Steinberg points out that the brand prestige decision is compatible with other commercial considerations: “the Russian market has 140 million consumers, but the rest of the world has 7.8 billion; if you don’t boycott Russia, you risk being boycotted by your own customers,” he says.
Javier Fernandez-Pachecoprofessor of finance at EAE Business School, abounds in the idea that the public image and economic calculation can go hand in hand in these embargo decisions: “If you sell to Russia and see that financial sanctions make it impossible for your customers to pay you, you can paralyze your economic relations and say that you do it in solidarity with Ukraine; you can also go out to It is important to stop sales if, with a low ruble, they could lead to losses that will not be counted if these operations are not carried out.In addition, with trade embargoes there are logistical problems (getting parts to factories in Russia, for example) that can make It is less profitable to continue activities than to stop them; and in the case of audiovisual companies, they reject the new Russian law that requires them to include local channels on their platforms,” he lists. “All of these factors can play a role in the decision to stop doing business with Russia, as much or more than the reputational factor,” he says.
future impact
To the brand and economic considerations, we must add the pressure of the Governments themselves, which the specialists also detect, although they assure that it is difficult to determine the degree of influence that politics has in the decision of companies. For the Global Head of Sanctions at the consultancy Oliver Wyman, Daniel Tannenbaum, there is little official pressure: “many of the companies that have announced the suspension of their services or their operations in Russia have done so of their own free will. That is why it is [una medida] quick to implement, and reflects a mix of desire to take a public stand [sobre el conflicto] along with the assumption that continuing in that market presents operational difficulties,” he explains to this newspaper.
The impact of these corporate sanctions on Russia is uncertain, because it will depend “on whether what has been said publicly is implemented (for example, the announced divestments of oil companies in Russia or the definitive stoppage of the Nord Stream 2 gas pipeline) and on whether the The void left by Western companies can be filled by companies from other places, such as China or India, because it is clear that Russia needs a lot of investment,” says Saz-Carranza. “The combination of sanctions can be powerful, because together affect many different aspects of life“, Jackson adds for his part. “The more sanctions, the more people will be potentially affected and the clearer the message will come. In the end, everything depends on the decisions of the leader, but the feelings of the population are also important.”