Foreign Companies’ Behavior in the Russian Market under Sanctions: Speculation and Reality

Abstract

This study aims to assess the scale of foreign companies’ withdrawal from the Russian market after the start of the Special Military Operation in Ukraine as well as the possibility of replacing them with counterparties from jurisdictions that have not joined anti-Russian sanctions. Expert assessments are based on the original database on foreign business behavior compiled by the Institute for International Studies at the Russian Foreign Ministry’s MGIMO University. The analysis shows that relatively small foreign companies are leaving the Russian market, while large international corporations are scaling back their operations in Russia and are more inclined to adapt to the new conditions. The negative impact on the Russian economy as a whole appears to be not as big as the assessment based on the Yale Database of foreign companies would suggest. The Russian IT sector, the business services sector, and the financial sector have expectedly proved to be relatively more vulnerable. At the same time, the natural resources sector (power and mining industries) is relatively more stable, and cooperation with state-owned (or state-affiliated) companies in jurisdictions that do not support sanctions against Russia has the best prospects.