As Western corporate titans flee their Russian connections – citing moral and economic imperatives – others, especially in food service and natural-resource-based industries, say they are stuck. McDonald’s, Starbucks, Papa John’s and Yum Brands – the conglomerate behind KFC and Pizza Hut – have all stayed mum on their plans for business in Russia after its invasion of Ukraine, as they come under growing pressure on social media and from large investors to quit Russia.
Dozens of marquee names have suspended operations – including Shell, BP and ExxonMobil – in response to the unprovoked attack that has devastated Ukraine and drawn international condemnation. But others are walking a finer line, such as French oil company TotalEnergies, which said it would halt new spending in Russia but maintain its partnerships there, including a nearly 20 percent stake in Russian gas producer Novatek.
Boeing, meanwhile, announced Monday that it would look elsewhere for the titanium it uses for its passenger jets, but it stopped short of pulling out of a joint venture to produce it. Russia’s metal industry – key to electric vehicles and semiconductor chips – is so dominant that analysts speculate it may be “too big to sanction.”
The moves show how deeply entrenched certain industries are in the regional and Russian economy. In agriculture, Ukraine is such a large wheat producer that it is known as the “breadbasket of Europe.” Russia is also a large grain producer.
Russia’s economy is small compared to that of the United States – $ 1.5 trillion vs. $ 20.9 trillion – but it’s too big to ignore. It would be, experts say, like a major corporation pulling out of Texas.
But for economic sanctions to pack the most punch, they say, Russia’s financial isolation must surpass what Western governments can impose and make corporations feel that operations in Russia are risky for both their public image and their balance sheet.
“The financial impact is not going to rock the market or their particular stock price,” said Gary Kalman, US director of the financial-corruption watchdog group Transparency International. “I do think that the reputational threat is larger in terms of people’s perception.”
Some of those corporations are getting called out on social media and by institutional investors. On Twitter, activists have been circulating lists of brands to boycott as they continue to do business in Russia, including McDonald’s, Coca-Cola, PepsiCo, Yum Brands restaurants and Starbucks.
McDonald’s owns the vast majority of its more than 900 locations in Russia and Ukraine, though it sold off 15 percent of them to franchisees after Russia’s 2014 annexation of Crimea.
But other food brands do not have as much control over their Russian operations. Most Starbucks, Papa John’s, KFC and Pizza Hut locations in Russia are owned by franchisees, limiting the corporations’ abilities to curtail their operations.
Representatives from McDonald’s, Coca-Cola, PepsiCo, Yum Brands and Papa John’s did not respond to requests for comment.
Starbucks chief executive Kevin Johnson wrote in a letter to employees Friday that the company’s 130 Russian stores were “wholly owned and operated by a licensed partner.” Johnson said the company will donate royalties it receives from its Russian business to humanitarian efforts in Ukraine.
Corporations in heavier industries have found it just as difficult to extricate themselves completely from Russian markets. Chicago-based aerospace giant Boeing depends on Russian titanium for things like fasteners and landing gear used in commercial jets. Titanium parts are also widely used in aircraft engines.
On Monday it suspended all purchases of titanium from Russia. It said it has enough stored away to keep producing planes without Russia’s help in the short term.
But Boeing did not comment on the future of its Russian investments, including a titanium production joint venture it started more than a decade ago. It reaffirmed that relationship as recently as November when it signed a memorandum of understanding with Russia’s VSMPO-AVISMA, which describes itself as the world’s largest titanium producer. The company is chaired by Sergey Chemezov, who is often described as a close associate of Russian President Vladimir Putin.
“Our inventory and diversity of titanium sources provide sufficient supply for airplane production, and we will continue to take the right steps to ensure long-term continuity,” Boeing spokesman Paul Lewis said in an emailed statement.
TotalEnergies chief executive Patrick Pouyanné said during a Monday energy industry conference that his company would not renounce its Russian connections because of Europe’s dependence on imported natural gas.
Pouyanné said the company did not face any pressure from authorities in France – which uses far less natural gas than other countries in Western Europe – to cut ties with Russia.
“I had discussions obviously with the highest authority in my country, and there is no push from them for us to exit Russia,” he said, according to Reuters.
At least one major public institutional investor called on corporations doing business in Russia to reevaluate their operations. On Friday, New York State Comptroller Thomas P. DiNapoli wrote to 10 companies with investments held by the state’s pension fund – including McDonald’s, PepsiCo, Mondelez and Kimberly Clark – urging them to reconsider their participation in Russian markets.
Together, New York retired civil servants hold $ 1.6 billion in the corporations, including a $ 501 million stake in PepsiCo and $ 410 million in McDonald’s.
“We believe that companies that continue to operate in Russia and invest in Russian assets face significant and growing legal, compliance, operational, human rights and personnel, and reputational risks. Furthermore, due to the situation’s unpredictability and the likelihood that conditions will deteriorate, companies must ensure that assets will not be stranded or otherwise encumbered by sanctions, ”DiNapoli wrote.
Maryland Comptroller Peter Franchot on Monday applauded American companies that halted their operations and partnerships in Russia, and called on US law firms, lobbying groups, developers and accounting firms that work with the Kremlin or Russian organizations to cut off their relationships.
“The most effective way to stop Putin from his unprovoked invasion of Ukraine is to hit him and his oligarch enablers in their wallets,” Franchot said in a statement. “We are not going to get involved militarily, so we must be forceful in our efforts to weaken them economically and financially.”
Jeanne Whalen contributed to this report.