, ,

Following the invasion of Ukraine by Russian forces, the United States, its NATO allies, and various other countries imposed strict sanctions on the aggressor. The sanctions aimed to limit Russia’s economic functioning and undermine the threat posed by Vladimir Putin by eliminating sources of revenue for his widely condemned aggression against a sovereign nation.

In response, a long list of retailers and marketers announced their plans to stop doing business in Russia, whether in terms of selling their products, sourcing materials, or investing in local companies. The responses vary in their intensity and planned duration.

For example, some firms announced they would temporarily suspend their operations while the aggression was ongoing. Nike, adidas, Apple, H&M, and most of the major luxury brands paused their sales in Russia. McDonald’s also halted sales, for the time being.

IKEA indicated it would halt all import and exports but continue operating a manufacturing plant, to supply local consumers of its goods. Similarly, PepsiCo announced its intention to stop cola sales but persist in producing and selling baby food and dairy products, which it presented as a humanitarian effort to avoid harming innocent civilians.

With even stronger responses, companies such as TJX (which owns TJ Maxx and related brands), Yum Brands (Pizza Hut, KFC), and Starbucks indicated they would be closing their stores and divesting from the local companies in which they had ownership stakes.

A few companies have chosen to remain, like Uniqlo, though whether they will be able to move products as need throughout the country is unclear. All the major logistics providers, including UPS, DHL, and FedEx, halted shipments in Russia and Belarus. Furthermore, credit card providers have imposed limitations, such that Russian-issued cards will not work outside the country, nor will foreign-issued credit lines be available within it. At the same time, many energy companies have suspended their operations, and the U.S. ban on purchases of Russian oil means that the physical movement of goods may soon become nearly impossible.

The pressure thus appears largely consistent, though whether it reflects an ethical stance by the companies or else a calculated attempt to avoid risk remains to be seen. When Russian oligarchs lose access to their bank accounts, for example, luxury brands have little incentive to remain open: No one could buy their luxury goods anyway. They thus can claim to be on the right side of history, even if their motives are somewhat more calculated that that.

Discussion Questions:

  1. What are some likely long-term implications of the sanctions on Russia for global supply chains?
  2. Are companies ethically responsible for leaving countries engaged in illegal acts of war? Is there an ethical argument to be made for staying to supply local consumers?

Source: Sapna Maheshwari and Vanessa Friedman, “No Ikea Shelves, No Levi’s: The Retail Exodus from Russia Is On,” The New York Times, March 9, 2022; “Here Are Some of the Businesses that Have Pledged to Cut Ties with Russia,” The New York Times, March 9, 2022