Explained | Will Western companies return to Russia?

As Moscow and Washington discuss how to end the war in Ukraine, one of the many questions on investors' minds is whether the corporate exodus from Russia in opposition to the February 2022 invasion of its neighbour may be reversed.

As long as broad Western sanctions on Russia remain in place, that looks unlikely, but should US President Donald Trump's administration seek to ease restrictions, it could open the door for some companies to return to what was once a high-growth market.

Here is a rundown of the situation:

Who exited and how?

More than a thousand companies from McDonald's to Mercedes-Benz have left Russia in the last three years by selling, handing the keys to existing managers or abandoning assets. Others like Danone and Carlsberg had their assets seized and a sale forced through. Western companies have acknowledged losses totalling $107 billion in writedowns and lost revenue, according to a Reuters analysis in March 2024. Kirill Dmitriev, head of the Russian Direct Investment Fund, says US companies have lost $324 billion by leaving Russia.

Companies such as McDonald's, Renault and Henkel agreed buyback options when exiting. France's Renault sold its majority stake in Russian carmaker Avtovaz in May 2022 for reportedly just one rouble, but with a six-year option to buy it back.

Some food and healthcare companies, including Procter & Gamble, PepsiCo and Mondelez, say they stayed on humanitarian grounds to continue supplying Russians with basic goods.

Which sectors are likely to want to return first?

After the highest-level US-Russian meeting since the Ukraine war began this week, Dmitriev said, without giving further details, that he expects a number of US companies to return as early as the second quarter.

The most likely to return are those operating outside sanctions, such as retailers and food producers, rather than those in sectors such as energy and finance.

Dmitriev said he believed US oil majors that had been successful in Russia would "at some point" return.

Senior lawmaker Anatoly Aksakov this week said he thought Visa and Mastercard would soon restore payment services. The two companies said their Russia suspensions remained in place.

Why would companies not return?

Hundreds of Western companies including Carlsberg and Unilever issued statements condemning Russia's aggression against Ukraine in the days and weeks after the invasion, framing their exit from the country or suspension of operations in moral terms.

Should a deal be reached that rewards Russia with Ukrainian territory, companies that have criticised Moscow risk reputational damage by returning.

What sectors are off limits?

Companies involved in supplying goods that have both civilian and military applications are bound by Western restrictions.

Boeing and Airbus, for example, halted the supply of planes and spare parts. Other examples include semiconductors, telecoms equipment and electronics. Speculation is rife on whether the US-Russia talks could yield a softening of sanctions, but no concrete proposals have yet been made. Meanwhile, the European Union on Wednesday agreed a 16th package of anti-Russia sanctions, including a ban on primary aluminium imports.

Sanctions prohibit providing Russia with financial or energy-related services and Russian officials' statements that they expect Western companies to return look for now like wishful thinking.

How has the Russian market changed?

Some of the world's most popular brands from Starbucks to IKEA and Levi's have been replaced by Russian imitations. The more than 800 McDonald's restaurants in Russia now operate under the brand Vkusno & tochka (Tasty & that's it), owned by Alexander Govor and run in a similar fashion. Starbucks sold its business to restaurateur Anton Pinskiy and rapper Timati, and is now known as Stars Coffee. Recapturing the market may be particularly hard for carmakers, as Chinese competitors have established a more than 50 per cent market share, up from less than 10% three years ago. It is not clear how willing Russia would be to support the return of European carmakers at the expense of Chinese ones, especially given the "no limits partnership" between Moscow and Beijing as trade between the two nuclear powers ballooned.

Would Western companies be welcome?

Moscow has long promised to retaliate for what it views as the theft of Russian assets abroad and has seized companies in Russia through presidential decrees and the courts. Russia currently controls a handful of Western companies through the guise of "temporary management" and is this year quickening the pace of asset seizures of companies with foreign ownership links. Most companies exiting Russia were forced to sell at huge discounts. Convincing investors to dip their toes back into the Russian market may take time.

($1 = 7.1560 Danish crowns