Has the Great Return Kicked Off? Western Corporations Eye Russia Again
Global Business Leaders Scanning Russia's Landscape
The machines at a Moscow factory of electronics giant LG are humming once more, producing washing machines and refrigerators in a test run - a sign maybe of a possible end to the conflict. But don't count on Putin popping the champagne too soon.
After three years of holding its breath, Hyundai is already on the hunt for new talent in Russia. Daughter companies of the conglomerate have posted job listings on the largest Russian job portal, Headhunter, for logisticians and IT specialists. If that's not a clear indication of resuming operations, we don't know what is. Korean car manufacturer Hyundai had sold its St. Petersburg car factory for a meager 80 euros in 2023, but managed to secure a buyback option.
Not just Asian companies are taking a fresh look at Russia's landscape. In recent weeks, numerous CEOs have been spotted rubbing shoulders with Moscow, and those in business circles who dare to comment are tiptoeing around the topic due to the ongoing sanctions.
Germans were, for a time, leading the charge in Russia. Trade between the two grew rapidly post-Cold War and peaked at over 80 billion euros in 2012. With Russia supplying raw materials like oil and gas, and Germany providing machinery and equipment, it seemed like a match made in heaven. But the war changed everything.
Even before the conflict erupted, German companies had invested heavily in Russia for years. Despite political uncertainties since 2014 (Remember when Crimea took a dive?), business continued to thrive, with German companies hesitant to abandon the prosperous market. However, the number of German firms operating in Russia has fallen from 3,400 to around 2,000 since the war began, and the revenue has plummeted as many companies froze their businesses.
Big-name absentees from Germany included VW, Mercedes, Henkel, Adidas, and Siemens. On the international stage, companies like McDonald's, Coca-Cola, Mars, Nike, Apple, IKEA, Toyota, Sony, Samsung, and the aforementioned Hyundai and LG pack their bags and head for the exit.
But Russia's economy seems to be thumbing its nose at the sanctions. The country achieved an economic growth rate of 4% in 2024, according to official figures - significantly higher than the EU's. While the uptick in GDP mainly comes from a boost in the defense industry and means little for the population's standard of living, Putin can count on most Russians to stand beside him in this fight. Many people in provinces who were once struggling to get by are now doing better thanks to higher wages in the defense sector, generous pay for soldiers on Putin's war, or survivor benefits for relatives of the fallen.
Despite the optimism radiating from Moscow, a return to "business as usual" seems like a distant dream for the time being. The independent portal "The Bell" surveyed around 60 of the largest companies that left Russia in terms of turnover and found that none of them had any concrete plans to return to Russia. Companies like Nokian Tyres, IKEA, Henkel, Nissan, or Wintershall DEA currently see no prospects. Only three corporations – Baker Hughes, Otis, and Bosch – are keeping their eyes open. The rest are waiting and seeing.
Trump's inauguration has thrown a spanner in the works for firms looking to sell their businesses in Russia. The buyers now seem to be Putin's cronies, such as Chechen leader Ramzan Kadyrov, who secured Russian Danone subsidiaries. German assets in Russia are growing rapidly, estimated at over 100 billion euros, according to the German-Russian Chamber of Commerce. This excess capital is trapped in Russia as the government prohibits the export of dividends.
Russian officials have had to admit that the picture is not as rosy as presented, even the Ministry of Finance in Moscow has acknowledged this. No inquiries have been made yet from foreign firms about a possible return, said Deputy Minister Ivan Chebeskov. So, for now, the Russians are waiting in the wings, biding their time.
[1] Russian President Vladimir Putin hints at potential return of foreign companies.[2]Foreign companies eying return to Russia, but under strict conditions.[3] Some Western firms explore opportunities for return to Russia.[4] Most Western firms have no plans to return to Russia for now.[5] Western companies eyeing opportunities in Russian oil sector, if sanctions ease.
- Hyundai, starting in 2024, is reinvesting in Russia by seeking new employment opportunities, as a sign of their intent to resume operations.
- In the realm of logistics and IT, jobs listed by Hyundai and other daughter companies suggest a possible reinvestment in Russia's employment sector, a move that might be emulated by other western corporations.
- As Hyundai prepares to reestablish its presence in Russia, the overall employment policy in the country is expected to undergo significant changes in the coming years.
