What to do with Russia? Stay or leave? It will be the question that has been discussed in every boardroom of Dutch companies doing business in Russia over the past week. As the invasion of Ukraine enters its second week and global multinationals rush to end ties with Russia, the Russian connection is under increasing pressure. NRC asked a number of large Dutch companies that do business in Russia what the war means for their business operations, and what their underlying reasons are for a possible (partial) departure.
It can be concluded from the answers that the sanctions have the most severe impact. In other words: the products and services that are delivered mainly determine whether the activities are continued or not. There are also concerns about the possible consequences of a withdrawal. Are you, as a company, abandoning your Russian employees, and what does it mean for the local population if your product is no longer available? Finally, some companies are faced with the moral question of whether they still want to be in Russia while it is fighting a bloody war in Ukraine.
This moral aspect applies most strongly to pension funds. Four of the five major pension funds are withdrawing from Russia. ABP (for civil servants and education), PFZW (health care and welfare), PME (metal and technology industry), and bpfBouw (construction sector) announced the sale of all their shares, bonds and other investments in Russian companies. A decision on Russian investments is expected on Tuesday at the fifth major pension fund, metal fund PME.
Value investments already decimated
The funds thus go much further than prescribe sanctions. What made the decision easier for most funds is that Russian investments make up a small part of their total investment portfolio. The four pension funds together have nearly 2 billion euros outstanding in Russian shares and bonds, measured by the value of just before the raid a week ago. For PFZW – which has the largest exposure in Russia – this represents 0.4 percent of all investments, for the other three funds less than 0.15 percent.
The value of these investments has been decimated as Western traders seek to move away from them en masse. That’s the way it is, a spokesperson for PFZW explains. “This is part of the pain that everyone is going to feel in their own way.”
Also read: Putin’s war is a moral test for Western companies
For other companies, the reasons for stopping in Russia are mainly practical. Since this week, airline KLM no longer operates flights over Russia and Ukraine, as a direct result of the sanctions. This includes a ban on the import of spare parts for aircraft, which would mean that a KLM aircraft with a breakdown would no longer be able to leave Russian territory. Russia and Ukraine are “not a huge market” for KLM, according to a spokesperson. Every week, KLM operated a total of 39 passenger flights to Kiev, Moscow and Saint Petersburg. Because KLM is now bypassing Ukrainian and Russian territory, the airline has to detour its Asian routes. According to a spokesperson, this means that less freight can be carried and more fuel is needed.
Shell was the first to announce its departure. Even former CEO Jeroen van der Veer did not see it coming: “Europe must remain a gas customer of Russia.”
Humanitarian goods and food
Other companies will remain active in Russia, but mainly focus on the supply of humanitarian goods and food – which are not subject to sanctions. One of those companies is chemical group DSM, which has a sales office and a mixing plant for animal feed in Russia. A spokesperson said that as a result of the war, DSM is withdrawing from a joint venture with a local packaging company, but that it will maintain local food production in Russia. Unilever, which has 3,000 employees in Russia and sells products from Ax, Dove and Calvé, among other things, will continue to do so. A spokesman said that the Russian employees are the reason for Unilever to stay in Russia, as is their sale of “essential products such as soap and soup” to Russian citizens.
Humanitarian reasons are also the basis for Philips to remain active in Russia, where it focuses on the supply and maintenance of medical devices to hospitals. The export of consumer products to Russia has been stopped, a spokesperson said. Although Philips has no factories of its own in Russia, a local partner does manufacture the brand’s ultrasound machines, MRI and CT scanners – exclusively for the Russian market. In this, Philips follows competitors such as Siemens Healthineers, which informs NRC that it will continue to supply medical solutions “as far as circumstances allow, in the interest of their patients”.
All the companies surveyed also expressed concern about the situation in Ukrainian cities, where citizens spend the night in air raid shelters. A number of companies that supply consumer products are very vocal in their condemnations. “We are deeply shocked by the senseless violence against innocent people in Ukraine and condemn the Russian invasion for what it is: a brutal act of war against a neighboring sovereign state,” Unilever said in a statement. Heineken also speaks of an “unprovoked and completely unjustified attack”. The brewer has 1,800 employees in Russia, and is the third largest brewer on the market. But despite the strong condemnation, Heineken continues to supply beer for the Russian market, which accounts for about 2 percent of total sales.
Some industrial companies are a lot less outspoken when asked about their reasons for continuing their Russian activities. For example, maritime construction company Van Oord, which has an office in Saint Petersburg, does not want to say anything about current activities in Russia – in its own words “for safety reasons”. Both Russian and Ukrainian employees work at Van Oord, whose safety is the first priority, according to a spokesperson. The company maintains a neutral line of communication: “Our focus is on everyone’s safety and we value respect for everyone’s political or religious background.” Paint manufacturer AkzoNobel has three factories in Russia, but does not want to say whether they will remain open. It says it is acting “in full compliance with the applicable measures and sanctions,” said a spokesman.
Also read: The blow of the sanctions hits the Russians hard
Recovery and transport company Mammoet also does not want to say much about the reasons for continuing the activities. “Of course we strictly adhere to the internationally applicable sanctions. We are following developments closely, with the safety of our employees being paramount,” said a spokesperson. Mammoet has major interests in Russia. In 2020 it dragged, in its own words, „the largest order in history” within. Mammoet is arranging heavy transport for the construction of a large liquefied natural gas plant. The total tender is $21 billion. What Mammoet will gain from this, it would say nothing at the time. The company has a lot of equipment in Russia. On the website At the end of February, operational director Ludo Mous told a crane trade magazine that 1,600 of the total of 5,000 heavy SPMT loading vehicles worldwide are in Russia. Parent company SHV announced on behalf of the entire group that no new investments or projects are being entered into in Russia, and that no new exports are taking place.
Help to Ukraine
All the companies surveyed are very concerned about workers in Ukraine and the situation of the civilian population in the country. Unilever says it is doing everything it can to bring its 146 Ukrainian employees and their families to safety. Some companies have launched fund-raising campaigns to provide humanitarian aid in Ukraine and neighboring Poland, where there are many refugees. For example, Philips provides a mobile hospital in Lviv and sends financial aid to Ukrainian refugees. DSM has started a donation campaign and Heineken pledged 1 million euros for local aid organizations. Mammoet’s parent company SHV supplies, among other things, gas cylinders with which Polish reception locations for refugees can be heated.
With the collaboration of Liza van Lonkhuyzen, Annemarie Sterk, Jan Benjamin and Christiaan Pelgrim