Major companies have yet to withdraw from Russia, nearly a year after the supposed Russian exodus.

After Russian troops invaded Ukraine in February 2022, companies across the G-7 major economies and the European Union announced plans to cease business operations in Russia.

This decision was made in response to the Russian government's actions, which were deemed to be in violation of international law.

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At the end of the year, new research from Switzerland’s University of St. Gallen showed that very few companies had fully delivered on their promise.
A report published earlier this month documented a total of 2,405 subsidiaries owned by 1,404 EU and G-7 companies that were active in Russia at the time of the first military incursion into Ukraine. This shows that a large number of companies from developed countries have a significant presence in Russia, despite the current political tensions between the two countries.

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By November 2022, fewer than 9% of companies had divested at least one subsidiary in Russia, and the research team noted that these divestment rates barely changed over the fourth quarter of 2022. According to professors Simon Evenett and Niccolo Pisani, confirmed exits by EU and G7 firms that had equity stakes in Russia account for 6.5% of total profit before tax of all the EU and G7 firms with active commercial operations in Russia, 8.6% of tangible fixed assets, 8.6% of total assets, 10.4% of operating revenue, and 15.3% of total employees.

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According to these findings, firms that exited Russia tended to have lower profitability and larger workforces than those that remained.
More U.S. firms have been confirmed to have exited Russia than those based in the EU and Japan, Evenett and Pisani noted. However, the report still found that fewer than 18% of U.S. subsidiaries operating in Russia were completely divested by the end of 2022, compared to 15% of Japanese firms and just 8.3% of EU firms.
The research found that of the EU and G-7 companies remaining in Russia, 19.5% were German, 12.4% were American owned, and 7% were Japanese multinationals.
Evenett and Pisani argue that these findings challenge the willingness of Western firms to disengage from economies that their governments now consider to be geopolitical rivals.

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The study's findings suggest that national security concerns and geopolitics are not leading to a fundamental unwinding of globalisation. This is a reality check on the narrative that has been circulating recently. Europe's status as a laggard in the push for Russian divestment was also highlighted by Barclays in a note on Friday, January 20. This is in contrast to the United States, which has been a leader in this area.

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The British lender’s European consumer staples analysts said that while most of the companies they cover had pledged to exit Russia, few have managed to do so yet. Various companies told Barclays that there were a host of challenges to fully divest, including pressure from stakeholders and the threat of sanctions.
According to Barclays analysts, there is a lack of clarity over what assets might be worth, and the list of potential buyers is short. Even the list of potential buyers who are exempt from sanctions is relatively small.

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There have been suggestions that the assets of companies that leave Russia, including intellectual property, will be nationalized.
Barclays suggested that the disconnect between pledges and outcomes will need to be resolved in order to end the conflict. This will force companies into some tough decisions.

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The analysts said that if exiting Russia at anything approaching a fair valuation is highly challenging (if not outright impossible), then companies have to choose between exiting at an unfair valuation (or indeed for nothing at all) and remaining in Russia. It seems unlikely that the conflict will end in the near future, and we suspect that pressure to make good on promises to withdraw may increase over time. Companies that have paused advertising and reduced product assortments but still intend to stay in Russia will be increasingly challenged by wider stakeholders and tightening sanctions, they added.

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Barclays has identified CCH, Henkel, PMI, JDE Peet’s and Carlsberg as the European consumer staples companies with the largest sales exposure to Russia.
Henkel has stated its intention to exit Russia and been transparent with the investment community on the likely impact. Barclays’ Henkel forecasts assume no contribution from Russia for full-year 2023 and beyond.

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According to Barclays, it is currently disproportionately profitable for companies to stop advertising in Russia. This is due to the lack of country-level EBIT data.
Henkel has stated that a Russia exit would likely impact earnings by 5% sales and 10% EPS. This is something that investors should be aware of, but we believe that Russia deconsolidation may also cause margin mix headwinds in other areas of Staples. Of the 29 consumer staples firms the unit covers, 15 have committed to exiting Russia. However, Barclays analysts are only aware of six that have actually carried out this plan.

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CNBC reached out to Henkel, CCH, Carlsberg, JDE Peet’s, and PMI for comment, but did not receive a response.
A new report from a U.K. think tank last week highlighted that some of the world’s biggest companies have announced their planned exits by writing off assets rather than selling them, thereby making “announcements of accounting entries instead of making Russian exits.” The report noted that this trend could have negative consequences for the global economy.

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Many people think that when something is written off, it has been lost. However, a write-down or write-off simply means that the owner has placed a lower or zero value on an asset at that point in time. This is a paper value that can be revised at any moment at the whim of the owner, as explained by Mark Dixon, a London-based mergers and acquisitions consultant who founded the Moral Ratings Agency think tank in February following the Russian invasion.

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The company can write up the value of its assets if it doesn't leave Russia and the world situation changes.