Companies are voluntarily cutting Russia out of their business plans

A second wave of voluntary sanctions by companies will be felt by ordinary Russian citizens

Today's expression: Take it upon yourself
Explore more: Lesson #451
March 17, 2022:

Companies from around the globe are pulling out of Russia in a second wave of voluntary sanctions. These go above and beyond the government sanctions already in place against the Russian economy, and ordinary Russian citizens will certainly feel the effects. But will this just make the Russian people miserable while the government and military stay the course? Plus, learn “take it upon yourself.”

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The business world responds to Russia’s war in Ukraine

Lesson summary

Hi there, I’m Jeff and this is Plain English, where we help you upgrade your English with current events and trending topics. Our full library of lessons, including this one, is available online at PlainEnglish.com/451.

From retail to oil, shipping to technology, companies across a wide variety of industries are cutting Russia off. These are voluntary measures that go above and beyond the financial sanctions imposed by governments. On today’s lesson, we’ll talk about some of the companies that have pulled out of Russia, and we’ll speculate on why they’ve done so.

In the second half of the lesson, I’ll show you how to use the English expression, “take it upon yourself.” And we have a song of the week. Let’s get started.

Companies add to Russia’s economic pain after sanctions

On Monday, you heard that western countries, ranging from the European Union to the United States to Switzerland to Japan, launched a coordinated effort to cut Russia’s economy off from the world . Financial sanctions punish banks and other companies from doing business with prohibited entities in the sanctioned countries.

Those sanctions targeted Russian banks, oligarchs, and infrastructure like airlines and pipelines. Legally speaking, though, most companies are still free to operate in Russia and sell their wares to ordinary Russian consumers, as long as they don’t do business with banks or specially-sanctioned individuals.

But businesses around the world have taken it upon themselves to stop doing business in Russia anyway, in protest against Russia’s invasion of and war against Ukraine. This is adding up to a second wave of sanctions, call it voluntary sanctions, against the Russian economy. And it’s these voluntary measures that will hit ordinary Russians.

Let’s start with some of the big announcements. You can’t talk about Russian business without talking energy. Several of the world’s energy giants have decided to divest of their assets in Russia. BP (a British company), Shell (a Dutch one), and ExxonMobil (an American one) have all agreed to sell their Russian investments. Total is a French conglomerate known for its willingness to work in unsavory places. Total has not yet decided to divest of Russia, but it has paused new investment there and it’s under increasing pressure to divest.

In the financial world, major investors have pledged to sell their Russian stocks. Norway’s sovereign wealth fund said it would sell all its Russian shares—admittedly not a large percentage. But other large pots of capital are following Norges Bank’s lead, selling Russian equities. The Russian stock market fell 33 percent in one day after the war started; that was the fifth-worst stock market plunge in world history. Russia’s government closed the exchange so stocks couldn’t trade. A Russian economist went on TV and drank a shot of vodka to toast the “death” of the stock market.

There will be more, long-term negative effects on Russian companies. Start in the boardroom. Many western directors have resigned from Russian company boards. Russian companies often recruit foreigners to serve on their Boards of Directors. By having western directors, Russian companies are more attractive to foreign investors; without them, now, Russian companies will be further isolated from the world. The Big Four accounting firms audit the world’s biggest companies. An audit from one of these firms is often required for companies to attract investors. All four decided to sever ties with their Russian offices.

Now for payments: MasterCard and Visa are the payment processors behind the vast majority of online consumer payments. They’re not banks, but they handle the payment processing for banks that issue credit cards. They were required to stop working with Russian banks on the sanctions list, but they appeared to be stopping all payments in Russia altogether. PayPal is another popular payment option that avoids banks and therefore is not covered by sanctions. PayPal voluntarily stopped processing payments in Russia on March 5. Apple and Google Pay were also suspended for some users. Discover, a smaller credit card network, was going to enter the Russian market; they called that off. Now, the simple act of paying for something online will be a lot more difficult.

Consumer firms are also shutting down their business in Russia. Apple and Samsung, the world’s two biggest smartphone manufacturers, said they would stop selling all products in Russia. Airbnb is suspending operations in Russia and Belarus. Nike, Adidas, Ikea, Zara, and H&M all pledged to close stores; Ikea had 15,000 workers in the country.

McDonald’s and Starbucks both said they would suspend operations. Shell, the oil company, will close its service stations in Russia. EA, the video game maker, said it would stop sales of games and in-app purchases to Russia; they’ve also pulled Russian and Belarussian teams from their sports games.

Several tech firms said they would block Russian government mouthpieces RT and Sputnik: Apple and Roku will pull them from their app stores; Facebook and DirecTV said it would block access to RT and Sputnik. Spotify, newly attuned to content moderation , said it pulled RT and Sputnik propaganda from its platform. Twitter will downplay Russian “news” sources.

Netflix operates in Russia, but the Russian government required it to carry state television on its platform. Netflix announced it would not be complying with that rule and it also backed out of four content deals for Russian projects. Disney said it would stop releasing films in Russia; Warner Brothers followed with a similar announcement.

Heavy industry is being affected, too. Ford makes cars in Russia as part of a joint venture with a local company; the American automaker said it would suspend all manufacturing activity in Russia. Volkswagen and Mercedes Benz, both headquartered in Germany, said they, too, would suspend manufacturing in Russia and halt exports. Boeing and Airbus, the aviation giants, said they would stop supporting Russian airlines. This means Russian airlines won’t have access to parts, maintenance, and support services.

Intel, the global chipmaker, said it would stop sending products to Russia and Belarus. Microsoft and Dell are doing the same. SAP and Oracle make enterprise software, the kind of software the largest companies use to manage their finances and operations. Both SAP and Oracle have stopped product sales and have limited existing service to Russian clients. IBM, a large software and services company, also suspended work in Russia. Maersk and MSC, two global shipping giants, have decided not to accept new cargo from Russia.

Finally, culture: Russian ballet performances have been canceled across the U.K. and the international chess federation canceled a competition in Moscow. FIFA, the governing body of soccer, and the International Olympic Committee, have historically demonstrated a remarkable moral flexibility with respect to Russia and other human rights abusers if the price was right. But this was too much even for them: FIFA banned Russia from the 2022 World Cup and moved a qualifying match out of St. Petersburg. The IOC will not allow Russian athletes to compete in the Paralympic Games in Beijing this month.

Why are companies doing this?

Why are companies doing this? I think there are a few reasons. First, some companies might not be subject to sanctions, but they don’t want to get anywhere near a sanctioned entity. So Visa, MasterCard, American Express, and PayPal are probably going above and beyond what the sanctions require, just out of an abundance of caution.

Shipping, too, is tied up with the financial system. Cargo ships need letters of credit from banks, deposits, and insurance policies, all things that might not technically be subject to sanctions, but shipping companies don’t want to take the risk. Nobody wants to be too close to someone that might be sanctioned. It also takes a few weeks to for a container ship to sail from its origin to its destination. During those weeks, all the rules could change.

The second reason, I think, is that the consumer is getting more of a voice, and global consumers (at least for now) are all in agreement on the right thing to do. There were 17 Ikea stores in Russia; they said 15,000 employees would be affected by their shutdown. That’s not a small number. But set that against the consumer backlash that Ikea would face in every other country, and it was probably an easy decision.

We can be cynical about business decisions, but I do think there is a genuine, moral component to these decisions, too. This is a global world now. Company bosses know people in Ukraine, maybe they’ve been to Kyiv. And now the whole world order—yes, it’s imperfect, but the whole world order has given peace and prosperity to so many people for so long is being shattered. And company leaders are doing what they can to not be part of the problem.

The question, though, is this: will this just make the Russian people miserable while the government and the military stay the course? This has never been done before. Russia has the eleventh-biggest economy in the world. And the effects of this are going to be felt in slow motion. We won’t know for several weeks what this is going to do to the Russian economy, and whether it will have any effect on the people dropping the bombs on Kyiv.

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Expression: Take it upon yourself