Many Western corporations continue to make business with Russia despite the official sanction policy

By Michael Pröbsting, International Secretary of the Revolutionary Communist International Tendency (RCIT), 11 February 2023, www.thecommunists.net

A few months ago, we published an article showing that many Western corporations continue to make business with Russia despite the official sanction policy. [1] A recently published study strongly confirms this trend. [2]

In this study, the two authors – Professor Simon J. Evenett and Profesor Niccolò Pisani – have analysed a total of 2,405 subsidiaries owned by 1,404 EU and G7 companies which were active in Russia in April 2022. They did then check how many of these companies had entirely divested at least one of their Russian subsidiaries by late November 2022. Their findings show that only “8.5% of EU and G7 companies had divested at least one of their Russian subsidiaries.”

They also show among the foreign companies that are still active in Russia, the largest number is from Germany (19,5%), the U.S. (12.4%), Japan (7%), Italy (6.3%), UK (5.8%), France (5.6%) and Austria (3.7%). [3] Among those which exited Russia “American and Finnish firms constitute considerably higher percentages of exiting firms than those that remain. To a lesser degree that is true for British, Danish and French firms.”

However, while US firms led the exodus, even US firms entirely divested fewer than 18% of subsidiaries operating in Russia. 15% of Japanese firms had left and only 8.3% of EU firms had.

Furthermore, the authors report: “Confirmed exits by EU and G7 firms that had equity stakes in Russia account for 6.5% of total profit before tax of all the EU and G7 firms with active commercial operations in Russia (…), 8.6% of tangible fixed assets, 8.6% of total assets, 10.4% of operating revenue, and 15.3% of total employees.”

Thinking with the moneybag

The findings of this study demonstrate the fundamental truth that the capitalists’ most important leitmotiv is the moneybag. American, British and French corporations made business with Hitler until 1939-41 and Russian oligarchs made a killing at Western markets during the period of the occupation wars in Afghanistan and Iraq after 2001. Why should this be different today?!

Furthermore, the study reflects the contradictions between the interests of individual capitalists and those of the bourgeois state. While the capitalist state – which Friedrich Engels called an “ideal total capitalist” ^[4] – formulates a strategy based on long-term geopolitical strategy, the individual corporation focuses on the next quarterly financial statement and possible reactions of the stock market.

We see the same problem, by the way, when it comes to China where the U.S. Administration – first Trump and now Biden – wages a trade war and sanctions regime against Beijing while American corporations are eager not to lose access to the huge Chinese market. [5]

“Too big to ignore”

In addition, these developments show that “Russia is too big to ignore”. It is not only a political and military Great Power but also an important market. As we explained in other works, official GDP figures tend to underestimate Russia’s economic strength since they underrepresent the production of capitalist value (and overrepresent non-productive and speculative sectors of the capitalist economy). [6] Contrary to the thesis of numerous Stalinist, Bolivarian and centrist forces, Russia is not a “semi-colonial”, “semi-peripherical” or “sub-imperialist” state but an imperialist Great Power. [7] Hence, Western corporations can't ignore the Russian market.

For the same reason, Western sanctions against Russia are failing to severely harm Putin’s Empire. ^[8] Matthew Klein, an economist whose findings about Western companies’ business with Russia we discussed in our above-mentioned article on this issue, recently published a report with updated calculations. He reports that the value of global exports of manufactured goods to Russia in November 2022 was just 15% below a monthly pre-invasion average. And according to his estimations, global exports to Russia most likely fully recovered in December 2022. [9]

Another recently issued study, published by Silverado Policy Accelerator, estimates that the value of Russian imports from the rest of the world had exceeded prewar levels by September 2022. [10]

Russia’s economic strength is also demonstrated by the fact that Western sanctions have failed to seriously weaken it. When the U.S. and Western Europe imposed unprecedented sanctions on Russia, Western politicians claimed that these would force Putin to give in. In March 2022, US Treasury Secretary Janet Yellen declared with certainty that "the Russian economy will be devastated as a consequence of what we’ve already done." [11]

The reality today looks very different. According to the January 2023 Update of the IMF’s World Economic Outlook, Russia’s GDP declined by 2.2% in 2022 (while Western institutes prognosed in spring last year a 10-15% slump). While the IMF forecasts that the Russian economy will grow by 0.3% in 2023 and by 2.1% in 2024, it says the UK will shrink by 0.6% and Germany, the most important economy in Europe, will grow by just 0.1% this year. ^[12]

We conclude our brief article by emphasising that socialists must not participate in dirty Great Power games but should stick to the principles of working-class internationalism and anti-imperialism: with the oppressed people – always, with the imperialists – never!

It is on the basis of such principles, that the RCIT and other authentic socialists continue to defend the Ukraine – a capitalist semi-colony – against Putin’s invasion. At the same time, we oppose all imperialist Great Powers and their policy, i.e. we do not support any side in the conflict between NATO and Russia. We have summarised such an approach in the slogan: “Defend the Ukraine against Putin’s invasion! Against Russian and against NATO imperialism!“ ^[13]