Foreign companies leave Russia to cause economic collapse
The imposition of sweeping sanctions on Russia has caused a mass exodus of foreign companies from the country, the devastating consequences of which are only just beginning to be felt. The withdrawal affects virtually all sectors of the economy: finance, aviation, automotive, energy, technology, telecommunications, services, entertainment, food production, fashion and consumer goods .
The list of major companies suspending sales, production and service in Russia includes Mastercard, VISA, American Express, Google, Apple and Apple Pay, Samsung, General Electric, Shell Oil, BP, ExxonMobil, Ikea, Nike, Reebok, Hyundai , Ford, BMW, Daimler, General Motors, Land Rover, Mercedes-Benz, Nokia, Ericsson, Dell, Siemens, BMW, Renault, Netflix, Walt Disney, Universal, Lego, Expedia, FedEx, Valio, Fazer, Danone, Arla, McDonald’s, Coca-Cola, Starbucks and hundreds more.
While medical and pharmaceutical companies are legally allowed to do business in Russia, the country’s withdrawal from the SWIFT system for international financial transactions is making it increasingly difficult for them to do so.
In short, masses of ordinary people in Russia are being squeezed out of the global market for the express purpose of depriving them of jobs, income and access to essentials, such as food and medicine. The aim of this “total economic and financial war”, in the words of French Foreign Minister Bruno La Maire, is “the collapse of the Russian economy”.
The American and European ruling classes extract their pound of flesh. The corpses of dead Ukrainians, who served as a cat’s paw to drag Russia into a long-prepared disastrous military conflict, are not enough for them.
The Russian government has released no official inflation data, as part of its desperate attempt to conceal the impact of the sanctions on the population. But experts estimate that inflation in the country is currently running at just under 17%. Food prices are skyrocketing.
Some regions are creating hotlines that consumers can call to report price spikes. The cost of vegetables in Moscow has increased by 2-17%. In Stavropol, a city of about 400,000 people in southwestern Russia, sugar is now 120 rubles, about four times as much as several weeks ago. Sverdlovsk has set limits on the amount of certain items consumers can buy, such as dairy products. People who try to buy food before they can’t afford it are emptying grocery shelves.
In Kazan, a mother told the press: “Four days ago I bought baby food for 1,381 rubles, but yesterday it was already 2,233 rubles. Local officials in the Khanty-Mansi Autonomous Okrug have just decided that they will officially start ‘checking the prices of food and basic necessities, including baby clothes, diapers and baby food’ , as complaints began to pour in from the public. “The prices of some children’s items have doubled,” said a regional representative.
The layoffs are spreading across the economy, as factories and retail stores close due to a combination of foreign company withdrawals, parts shortages, sanctions that prevent Russian companies from doing business and a drop in demand.
Food producer Fazer is to lay off 2,300 workers at its St. Petersburg operations. Nissan, which employs about 2,000 people at its plant there, is closing, as is Hyundai, with another 2,500 workers. Bonava, which has about 370 people on its payroll, is suspending construction projects in the city. A papermaker in the largest region of which St. Petersburg is a part, Leningrad Oblast, could close and cut 1,700 jobs.
The auto industry is particularly hard hit, with US and German automakers with large-scale facilities in Kaluga, Nizhny Novgorod, Togliatti and elsewhere announcing permanent or temporary shutdowns. Hannover-based car company Continental has just said it will shut down operations in Kaluga, which lies south and east of Moscow and has a population of around 325,000, putting 1,300 jobs at risk.
In addition, food manufacturers Valio and Paulig are closing in Tversk Oblast, with 600 layoffs expected.
McDonald’s, which employs 62,000 people in Russia, has just declared the cessation of its activities, as have Starbucks and Coca-Cola. There has been a mad campaign in the Western press in recent days pointing fingers at companies that have not yet closed shop, with the express purpose of achieving what has just been achieved.
This is just the beginning. Companies emerging from the Russian economy employ hundreds of thousands of people directly and millions indirectly. According to an analyst writing on the Russian business news site Investing.com, depending on the industry in question, Russian producers depend on foreign supplies and services up to 40% for all of their parts and operations. This includes businesses in food production, the service sector, metalworking, aviation and shipping, for example.
The Republic of Kabardino-Balkaria News Agency, located in the Russian North Caucasus, published a brief report indicating the number of employees of some of the companies closing their operations in the country. He lists the following: Ikea, 15,000 jobs, Renault-Nissan in Togliatti, 35,000 jobs, BMW Avtotor, 3,500 jobs. He noted that Yandex, Russia’s main search engine, had warned its 12,000 employees that it was at risk of default.
This report was affixed with a large red label that read “False”. It has since been deleted, an action less likely the result of the information’s actual falsity and more likely the product of the danger it poses to the government. President Putin has just issued fines and prison terms for spreading “fake” news that would undermine the government’s war aims.
The Kremlin is trying to manage the spiraling crisis by projecting a false image of calm, cleaning the internet of damaging reporting, announcing a limited number of social measures and declaring full support for the business sector.
The Ministry of Finance announced on Tuesday that 455 billion rubles are allocated for payments to families with children aged 8 to 16. Depending on where they live in Russia, they will receive between 50 and 100 percent of the official subsistence minimum for a child, which is between 6,000 and 12,000 rubles.
If the mother in Kazan who is trying to buy baby food received such a quantity – which she will not receive because her child is under 8 years old – she could buy perhaps three to five extra packs of the product .
The government has also declared a moratorium on audits of small and medium enterprises and IT companies by 2024. Companies that need to renew their licenses will be allowed to continue operating, the process of selling products to the state is simplified and the authorities won the right to increase pensions. In addition, those who earn less than 20,000 rubles a month will no longer have to pay taxes, which will save them about 2,600 rubles. Given that millions of Russians work in the underground economy, especially those at the lower end of the pay scale, this does little to help.
At the start of the war crisis, President Putin declared that Russia would ensure “maximum freedom for business”. This can only mean giving free rein to Russian companies to cut labor costs as they see fit and, when workers object, using state power to keep them in their jobs.