French companies hesitate as Russia is under increasing pressure

Renault, a French automaker, plans to stop production at its Moscow facility.

French companies hesitate as Russia is under increasing pressure

This apparent move is to counter mounting criticism and break ranks with other French companies that have refused to operate in Russia following the invasion of Ukraine.

The board of directors of the company voted Wednesday night for the suspension of "activities at Renault Moscow plant." This decision came after Volodymyr Zelenskyy, the Ukrainian President, accused France and Renault of supporting Russia's war effort in an emotional virtual address to Parliament.

Many foreign multinational corporations have stopped operating in Russia due to sanctions imposed by the U.S.A. and its Western allies. These sanctions were intended to cripple Russia's economy.

Some French companies are known for their refusal to leave. This highlights how France and its companies often feel proud to be more independent than the U.S. or United Kingdom in relation to Russia policy. This stance has begun to fall apart as the war continues.

French President Emmanuel warned on Thursday of "reputation risk" for Russian groups, but stated that they are free to make their decisions.

"I am letting the companies decide for themselves. He said that it was up to the leaders of the companies to evaluate the situation at a Brussels news conference.

Leroy Merlin, a home improvement company, and Auchan, a supermarket chain, and Decathlon, are some of the high-profile brands that have refused to end their business with Russia. TotalEnergies, a French energy company, issued a hostile statement this week. It stated that it would cease buying Russian oil, but warned that an hasty withdrawal would only be beneficial to Russian partners.

French food giant Danone announced Wednesday that it will continue local production in Russia of essential milk and infant nutrition products. It said it has a duty towards Russians who depend on it for food. Danone stated that it condemned the war, suspended Russian exports, imports, and investments and does not expect to make any profit from its Russian business.

Witold Henisz from the University of Pennsylvania's Wharton Business School, said that French firms are more deeply embedded in Russia than U.S. companies, making it more expensive to leave.

This is especially true for parts manufacturers and automakers whose European factories could be closed down without Russian-made components, according to Henisz who studies political risk in corporations.

Henisz stated that French political and business leaders still believe that France's continued engagement with any country of any political system gives it more political and economic power and leadership in Europe.

The heat is not just felt by French companies. Nestle, a Swiss multinational food company, attempted to deflect criticism Wednesday by saying that it would remove certain brands from Russia (including KitKat candy bars, Nesquik milkshake powder) but will continue to supply "essential food."

In his address to France's Parliament, Zelenskyy specifically mentioned some French companies and pleaded for them to cease indirectly supporting the war on Ukraine through their presence in Russia.

Zelenskyy stated that Renault, Auchan (and Leroy Merlin) must cease sponsoring the Russian warmach and the murder of children, women, robberies, and looting perpetrated by the Russian army. All companies should remember that value is more important than profit.

Dmytro Kuleba, the Ukrainian Foreign Minister, tweeted Wednesday urging customers and businesses to boycott Renault. He wrote that "Mistakes have to come with a cost" and included a photo describing Renault as the "sponsor for Putin's war".

Renault, partly owned by France, temporarily stopped production at its Moscow facility during the conflict. This was due to logistical issues. However, it reportedly resumed production days before Zelenskyy's French address. It produces Renault's Arkana and Kaptur SUVs, as well as the Terrano model for Japanese partner Nissan.

It will continue to be under pressure because it failed to leave its Russian subsidiary Avtovaz. This is the largest share of Renault's presence in Russia. Renault's Russian subsidiary sold nearly half a million cars last year.

Renault stated that it was not withdrawing immediately but is merely "evaluating the available options, taking in account the current environment, and acting responsibly toward its 45,000 employees here in Russia."

Leroy Merlin, like Decathlon and Auchan, has been more stubborn than Renault and refuses to close its Russian business. Leroy Merlin's management issued a statement reaffirming its desire to keep its Russian stores open, a decision supported by French regional political leadership.

Adeo's parent company was not able to change its mind about Sunday's Russian bombardment of a Leroy Merlin shop in Kyiv. The chain was also accused by the Ukraine's Defense Ministry of indirectly financing the strike through its operations in Russia.

According to the company, maintaining our activities in Russia "is a difficult decision." "We don't have any reason to condemn Russian troops for a war that they didn't choose," the company said, adding that it still holds "responsibility" as an employer.

TotalEnergies denounced the "serious, unfounded allegations of 'complicity and war crimes'" made against it. It claimed that sanctions combined with Russian laws regarding foreign investments prevented it from finding non-Russian buyers for its minority stakes at several private Russian energy companies.

The company stated that abandoning these interests without consideration would benefit Russian investors and be in contravention to the sanctions' purpose. Rivals Shell and BP announced swiftly that they would be exiting their Russian energy projects.

TotalEnergies stated that it cannot avoid purchasing Russian liquefied gas to supply Europe in a short-term. It cited the continent’s "gas logistics capabilities" and pointed out that it does not have the same domestic resources like countries such as the U.K.

Societe Generale, a French bank, stated this month that Russia's largest private lender is exposed to it at 18.6 billion euros. It also warned of possible deprivation of its local operations.

Henisz, a management professor, stated that French companies are following the historic rules of a postwar order that was upended.

He said, "The only question that firms have to answer is whether or not they will emerge early and appear courageous or be dragged among the last in their sector."

Henisz said that French companies will have to "pay the price of looking the other direction as Russia signaled its intention to leave the international systems." Their shareholders and some EU clients will be hurt. It's only a matter of time.


 

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