Geopolitics, conflict, and decoupling: evidence of Western divestment from Russia during 2022

Abstract

How foreign firms doing business in Russia responded to the invasion of Ukraine in 2022 has received extensive media scrutiny. Publication lags in official and private databases on international corporate activity, traditionally used to investigate cross-national commercial ties, preclude short-term assessments of foreign firms’ responses. However, as geopolitical events unfold quickly, such assessments can offer valuable insights. In this paper, we advocate for and implement a replicable, near-time methodology that is executed at arms-length to track foreign corporate responses to geopolitical events which can inform both academic debate and policy deliberation. We apply it to the ongoing Russia–Ukraine conflict, estimating Western corporate divestment rates from Russia during the first 9 months of the conflict. Our findings, confirmed by extensive robustness checks, result in divestment rates in the range of 5–13%. This range is interpreted in light of the prevailing sanctions regime as well as the divestment rate witnessed after Russia’s invasion of Crimea in 2014. We also discuss the competing, often policy-induced, incentives facing international business during a time of growing geopolitical rivalry and draw implications for the design of sanctions regimes. Avenues for future research are also outlined.