No, Western companies aren’t rushing back to Russia

The Bell

7 Mar 2025

Hello! Welcome to your weekly guide to the Russian economy — written by Alexandra Prokopenko, Denis Kasyanchuk and Alexander Kolyandr and brought to you by The Bell. This week we look at why Western companies won’t be going back to Russia despite the detente between Moscow and Washington. We also examine data suggesting Russia’s economy is cooling.

US-Russia political detente does not mean a return of Western business to Russia

Following the foreign policy U-turn by the United States, and its embrace of Russia, there has been intense speculation about whether economic ties might be restored. However, while the Kremlin is delighted with U.S. President Donald Trump halting military aid to Ukraine and publicly humiliating his Ukrainian counterpart, Volodymyr Zelensky, this seems unlikely. There has not – at least not yet – been any meaningful talk about lifting Western sanctions on Russia, and no proper discussions about joint projects. Washington last month extended existing sanctions on Russia for another year.

Investors are hesitant

For big Western companies, Russia remains a high risk investment. First, nobody knows what will happen to Russia’s reserves, which were frozen at the start of the full-scale invasion (the majority, about $210 billion, is held in Europe). As long as those reserves remain frozen, Western investments in Russia are stuck in special accounts (and the Kremlin regularly threatens to appropriate these funds as a retaliatory measure). The precise sum of frozen Western money is unknown, but it’s a significant sum.

Second, in recent years Russia has made it much harder for foreign companies to operate. There’s a system of classifying friendly and unfriendly states, restrictions on withdrawing capital, and removing equipment. Foreign assets can be seized by presidential decree or via a decision by the Prosecutor General. The Russian government can take control of a company if a court rules that the company is “too important to be owned by foreign shareholders.” It was in this way that gold miner Highland Gold and the Finnish Archtech Helsinki Shipyard lost control of their Russian assets. In some cases (for example, the appropriation of the assets of U.S. oil services provider Schlumberger), Russian courts have heard cases about foreign companies behind closed doors.

The exodus of Western countries from Russia in spring 2022 following the full-scale invasion was a shock for Russian officials. “It still seemed that business was business, and politics was politics,” an official admitted to The Bell back then. But the exodus was huge. In the first two years of the war alone, Reuters calculated that companies leaving Russia lost over $107 billion. Moreover, the process is ongoing – Western companies are still leaving.

The new face of business in Russia

The war in Ukraine has changed Russian business beyond recognition, with foreigners selling their assets (regardless of years of work in the country); being prevented from accessing dividends and removing property; losing copyright over their brands; and seeing their Russian managers jailed. The government has imposed a 50% tax on departing companies, requiring each sale to be approved on a one-off basis. Last year, The Bell compiled a chart of Russian businessmen who had profited from the exodus (here's the complete ranking in Russian). They included billionaires like Vladimir Potanin and Putin loyalists like Igor Sechin, as well as other businessmen who have deftly managed to take advantage of the situation. This year the picture hasn’t changed.

Are any companies planning to return?

As relations between Washington and Moscow appear to thaw, Russian officials are obsessed with the idea that U.S. companies will soon be back. Even Russian President Vladimir Putin has mentioned the subject, warning these mythical returning companies to expect a new business environment that is more profitable for the Russian state. “You know, we’re not waiting for anyone with open arms. You will have to pay for everything, for all your behavior,” Trade and Industry Minister Anton Alikhanov said last month. “We see this as another opportunity for development.”

Apparently, the Economic Development Ministry is already working on the conditions for returning companies. And the Federation Council has developed patriotic rules for returning car-makers — from now on, they will only be able to operate in Russia with local partners; they won’t be eligible for subsidies; and will have to carry out a full technology transfer. Some Russian officials are calling on Western companies to attend round tables about re-starting work in Russia, the Financial Times reported.

It’s possible that some Western companies are considering re-entering the Russian market. “If this is an American brand that could easily return to the consumer sector, why not?” said the GR director of a leading retail chain. But, for the most part, businesses that left after the war are in no hurry to return. “I can’t say that there’s already a huge line of people wanting to return. A few companies are interested, are getting involved, phoning their lawyers and keeping their finger on the pulse,” the head of the American Chamber of Commerce in Russia, Robert Agee, said in an interview published Friday. He added that some companies involved in fast-moving consumer goods might go back – but not much more than that.

The Bell sent questions about their plans in Russia to more than 60 foreign companies which, according to the Kyiv School of Economics, were market leaders (in terms of revenue) among those firms that left Russia after the invasion of Ukraine in 2022. We received 16 responses – and not one of them was positive.

Several companies responded with a blunt “no” when asked about returning to Russia. These included Nissan (Japan), Nokian Tyres (Finland), ELKO Group (Latvia, electronics), telecoms holding VEON (UAE), Ingka, the Dutch holding that owns IKEA, as well as Henkel and U.S. elevator manufacturer Otis.

American oilfield services company Baker Hughes told The Bell that: “if and when sanctions on Russia are lifted” it would “evaluate the commercial environment for a return.” Bosch said that it is in discussions with the Gazprom Household Systems holding, which, in May last year, became the administrator of two factories that once belonged to the German company.

Swedish Tetra Pak, Polish restaurant holding AmRest, Italian oil company Enel, German IT provider SAP, Danish brewer Carlsberg, Australian packaging manufacturer Amcor, Swedish truck manufacturer Scania and German DIY chain OBI all declined to comment.

Exclusive offers

After the talks in Riyadh with the U.S., the Kremlin created a new position for a “special representative for investment cooperation with foreign companies.” The post went to Kirill Dmitriyev, head of the Russian Direct Investment Fund (he was recently profiled in the FТ, and The Bell wrote about him in a joint article with Meduza). Born in Kyiv, Dmitriev graduated from Stanford and Harvard, and now serves as a go-between for Putin and foreigners. He has personal connections in Trump’s inner circle. After the Riyadh talks, Dmitriev mentioned possible U.S.-Russia projects in the energy sector. Bloomberg also reported that Russia might offer U.S. companies opportunities in logistics, and Arctic development.

To a certain extent, this all makes sense: Russia-U.S. trade has always been rooted in raw materials. Traditionally, most of Russia’s exports have been primarily oil and gas. In 2021, the last year before the war, more than half of Russian exports to the U.S. (valued at some $17.5 billion) were oil, petroleum and other fuels. A further third went on metals (such as aluminum), precious metals and stones (such as palladium).

Before the war, Russia mostly imported hi-tech goods from the United States.

Big companies from both countries continued to work in the other country after Western sanctions were first imposed on Russia in 2014. But, after Russia’s full-scale invasion of Ukraine in 2022, economic ties were almost entirely severed. By 2024, trade had slumped to be worth $3.5 billion, its lowest level since 1992. The range of goods traded has narrowed dramatically, and is now restricted to Russian fertilizers, nuclear fuels and platinum group metals. U.S. exports to Russia amounted to just $526 million last year.

Many of the U.S. sanctions on Russia were imposed via legislative acts and can only be lifted with the approval of Congress. In these circumstances, talk of “business as usual” is premature to say the least. “I don’t think America’s big businesses are going to rush back into Russia fast, if at all, and surely not soon,” Carl Weinberg, chief economist at High Frequency Economics told The New York Times last month

This week, the Financial Times reported on efforts by a former Eastern German Stasi officer-turned Putin confidante, Matthias Warnig, to restart the Nord Stream gas pipeline with the help of U.S. investment. But this is far from being evidence of a “normalization” of the business relationship between Russia and the West.

Why the world should care

State-owned Russia media might give the impression that there is a line of foreign companies impatiently waiting at the Russian border for the chance to return. But this is misleading. A warm relationship between Putin and Trump does not mean changes to Russia’s business climate. And foreign investors in Russia are welcome only in theory – not practice. Any deals that do come to fruition are likely to just be one-offs.

Evidence mounts that Russia’s economy is slowing

With each passing month, more and more data emerges to confirm that Russia’s once overheated war economy is beginning to cool. And that means inflation might start to ease.

The volume of lending to individuals in Russia was down 47.8% in February, to 538.6 billion rubles compared to the same month a year previously, according to analytical agency Frank RG. That is approximately in line with the dynamics of recent months. The volume of issued mortgages was down a third in the same month, while car loans fell 51%, and cash loans were down 47.7%.
At the same time, Central Bank statistics show a slowdown in the growth of money supply (an inflation indicator). After two months of 19.2% year-on-year growth, the level slipped to 18.7% on March 1.
All this indicates that inflation might be starting to slow. Kirill Tremasov, an advisor to the Central Bank, even said that the next Central Bank board meeting on March 21 might discuss lowering interest rates.
The market is also hoping inflation might fall. Last week, the Finance Ministry achieved its target of selling first quarter domestic debt ahead of schedule: after the last two OFZ placements for 218 billion rubles, the overall sum of government debt placed in January and February exceeded 1 trillion rubles ($11.5 billion). That’s a real contrast with last year, when expectations of rising inflation dissuaded investors from buying at offered rates. Now, amid expectations of a slowdown in inflation and, therefore, interest rates, OFZ yields are also falling. The market seems to expect interest rates to begin falling in the latter half of the year.

Why the world should care

An overheated war economy was one of the major dangers to the stability of the Russian economic system. But the risks now appear to be receding.

Figures of the week

Between February 25 and March 3, weekly inflation slowed from 0.23% to 0.15%, according to the Economic Development Ministry. Annual inflation remained at 10.07%. The Central Bank indicated that in the first quarter of this year, inflation could reach 10.2%.

Russia’s budget deficit could exceed the planned 0.5% GDP, but will remain below 1% as long as prices for Russian oil remain around the current rate of $60, said Deputy Finance Minister Vladimir Kolychev.

Liquidity in the National Welfare Fund continued to fall in February. Compared with January it fell from 3.75 trillion rubles to 3.39 trillion. The total size of the fund is 11.88 trillion rubles.

No, Western companies aren’t rushing back to Russia