To leave or not to leave: the dilemma of the Russian commercial exodus

Early morning, on 24 Feb. 2022, I woke up in my dorm room in the main building of Moscow State University to unbelievable news: Russia had invaded Ukraine, and my host-country was now at war. Unlike Kyiv, Moscow and its inhabitants were not in immediate danger, but the news of war alone was enough to deeply disturb the Russian population—especially the younger generation, the majority of whom did not support the actions of Vladimir Putin’s regime. A steady stream of outward movement soon began to form. As of May 2023, as many as 1 million Russians are estimated to have fled since the onset of war. This phenomenon is now being referred to as the “Russian Exodus,” as an unprecedented number of people continue to leave the politically tyrannical country, having lost hope for its future. Powerful foreign enterprises also decided to join the crowd flocking out of Russia, making this a commercial exodus as well as a political one.

With even Russian citizens choosing to depart from the country, the answer seemed clear for non-Russians: leave. In the early stages, panic was the main factor that drove the expats out, as it was unclear how fast, and to what extent the conflict would escalate. Several governments, including those of France, Ireland and Japan, hastened to evacuate their citizens. I stayed put, as the Korean embassy did not issue a statement requiring citizens to return home. The Korean government took measures to update its citizens on how to act in case of immediate danger, and created an emergency contact list to keep track of the number and whereabouts of their citizens that remained in the country. This gave me a sense of security and helped me make the final decision to stay, in order to improve my aptitude in the Russian language by immersing myself in Russia’s unique culture. Naturally, this also meant I would be experiencing firsthand the consequences of the war reflected in everyday life.

Soon after the first wave of panic had blown over, another exodus befell the Russians: this time in the commercial sector. Numerous western enterprises announced their grand exit from the Russian market as a sign of support towards Ukraine. Most foreign brands across many different sectors released statements condemning Russia’s actions, and subsequently promised to cut ties with the country. This movement was met with international praise; to the Russians, however, this was quite a blow.

Western brands and services permeate every aspect of our globalized society, and prior to the war, Russia was no exception. I found myself facing problems in the most unexpected places. I wanted to buy a shoe rack, but IKEA had been shut down. I wanted to go on a trip, but SkyScanner, Airbnb, and Booking.com had halted operations in Russia. I wanted some soft drinks to go with my food, but my options were “Cool Cola” instead of Coca-Cola, “Street” instead of Sprite, or “Fancy” instead of Fanta - Russia was only left with copycat versions of original brands.

The exodus prompted a rush to stock up on Western products whilst they were still available. In response to the nationwide closure of McDonald’s, some people sold Big Macs on Russian e-commerce platforms for more than ten times their original price. Many Russians frantically lined up in front of stores in hopes of buying one more item from brands exiting the country. I was one of those people, standing in line outside Japanese clothing store Uniqlo an hour before it closed down for good. I didn’t need anything in particular, but the news of the shutdown triggered a strange feeling that I had to buy something before I couldn’t anymore. The mall was packed with people; evidently, I wasn’t the only one with this idea.

By the end of March, Western stores officially closed their shutters, and the central section of the mall they previously occupied was now deserted. GUM—Moscow’s symbolic department store on the Red Square – tried to keep up appearances by leaving the lights on in closed high-end stores, but there was no denying that it had lost its main purpose as a shopping center. Media outlets worldwide captured this scene to highlight the exodus’ effect on Russia.

However, from what I observed throughout the rest of the year, this was certainly not the end of the story. While the world was busy tending to other more pressing issues, some stores that had closed slowly started re-opening; some under the same name, many others under a different one. It is now clear that the number of companies that have cut ties with Russia is not as large as was previously perceived. As it happens, many businesses have technically exited the country but still continue to have a presence in, and gain revenue from, the Russian market.

With Russia’s military actions still raging a year after the war’s initial outbreak, and without an end in sight, businesses are being made to take a stand on how strongly they will put their foot down—whether or not they will keep the doors open in case the situation improves in the future. As such, Western businesses in Russia seem to have chosen one of three paths since the war: 1) sell the company to a Russian buyer and/or end all future business with the country; 2) stay silent and remain in Russia; or 3) sell the company but still keep one foot in the market through parallel exports.

Many food retailers fall under the first category, as it is relatively easier for food chains to find alternative suppliers to keep their businesses up and running. Consequently, these Western companies were quickly replaced by Russian substitutes: McDonald’s became Vkusno i tochka—meaning “Tasty and that’s it”—sporting a new abstract logo that is supposed to depict a hamburger and two french fries, making up the letter ‘M’. The new logo, however, undoubtedly brings to mind the two golden arches of McDonald’s. The move seems intentional, as the company selected a slogan that translates to: “our name is changing, but our love stays the same.” Similarly, Starbucks became Stars Coffee; the new owners, rapper Timati and restaurateur Anton Pinskiy, decided to keep Starbuck’s iconic siren intact, except for the Russian head ornament they opted for instead of the original star-topped crown. The two companies that are widely considered to be the symbol of Western influence have now been turned into Russian-owned analogues that make no effort to hide their origins. On the contrary, they utilize both logo and name to send a blatant message that there have been no changes. However, that is not necessarily the case, according to a Russian student who wished to stay anonymous.

“The situation is funny if you look at it from afar. [These companies] are trying their hardest to show that they are the same as before, when in reality, everything is different—they are copies of the original brands. There are not many convenient fast-food places that can take McDonald’s’ place, so I go to Vkusno i tochka sometimes. As for Stars Coffee, there are many excellent substitutes based in Russia, so I don’t go there at all,” she commented.

Other enterprises have decided to stay, either by force or by choice; Burger King and Marks & Spencer, which had already been operating in Russia via franchising, were unable to close their shops as their franchising partners refused to do so. Moreover, prominent Russian allies like Turkey, China and the United Arab Emirates are still doing business in Russia as normal.

The third category, which concerns companies remaining in Russia, but only through parallel imports, lies in a legally gray area. Shortly after a wave of sanctions were implemented by countries that condemned Russia, the Russian State Duma—the lower house of the Russian parliament—introduced a law legalizing parallel imports. This meant that Russian businesses would now be allowed to import Western products via a third-party country, bypassing restrictions. This can result in already discontinued products making their way back into the Russian market without the original manufacturer’s consent. Such was the case with Coca-Cola. Although they had already halted production in Russia, the world-renowned soft drink was still found on supermarket shelves, having been imported from countries keeping non-hostile relations with Russia including Iran, Turkey, and Kazakhstan.

Other companies are hiring middlemen who essentially help them continue their business in Russia. For instance, Polish apparel company LPP S.A., which owns a number of different brands, sold its assets to a Chinese company, who has changed the names of the stores (Reserved → RE, Sinsay → SIN, Mohito → M). Unlike H&M and Uniqlo, who temporarily re-opened stores in Russia only to sell off their remaining stock, these newly re-opened stores carry the brands’ newest collections, signifying that the company is still indirectly doing business in the country.

From this perspective, the “Russian Exodus” poses some challenging questions. Is the gesture to close the companies enough to show support towards Ukraine, or should companies cut ties with the country completely for their intentions to be considered valid? On the other hand, should a business’ action of staying in the country be considered a show of support for Russia?

As an exchange student who could have left but decided to stay, these were thoughts that were not alien to me. I personally did not agree with Russia’s actions in any shape or form, but I did have something to gain from the country as a student majoring in Russian Language. The moral dilemma and guilt stayed with me until the end of my exchange period.

My reason for choosing not to leave lay in nothing other than achieving my personal goals. It seems my guilt largely stems from the fact that I stayed, when the majority of people around me were leaving. The constant news of my peers departing made it seem like I should also have done so. Such was the case with businesses, but the choice appeared considerably more obligatory. As the exodus quickly spread, it seemingly morphed into a binding social contract. If companies were seen not to leave, they would be condemned by people keeping a close eye on the situation; a site called “#LeaveRussia” was created for this very purpose. As such, foreign enterprises were cornered into halting operations as soon as possible. Some companies managed not to look back. Others, however, were not as lucky.

Many things are at stake in this complicated dynamic. On the one hand, companies risk major financial loss by exiting, losing out on potential profits they could have gained from the market. They also have to face obstacles placed by the Russian government, which is trying to prevent companies from pulling out. On the other hand, these companies subject themselves to major criticism from customers and shareholders by staying, which can also lead to monetary setbacks in the future. Balancing economic and social costs, enterprises are navigating a very delicate situation; take one wrong step and they will find themselves in hot water.

Discourse around the commercial exodus seems to have been focused on condemning the fact that businesses are gaining revenue from the Russian market. In reality, however, staying does not ultimately guarantee profit; remaining in Russia can be the cause of bad PR and thus consequent potential financial setbacks in the long run. Companies have a hefty price to pay either way.

What it all boils down to is this: when I made the decision to stay, I was operating on a thought process of maximizing gain. My choice was made by comparing the benefits of staying versus those of leaving. However, companies’ operation strategies were most likely centered around minimizing loss. As opposed to seeing the war as an opportunity to gain profit, they were most likely just trying to find a method to stay afloat amidst the turmoil with minimum damage. Neither one of these decisions had underlying political motives; rather, it can be seen as an attempt to carry on with life despite the unrest. The exodus is not over, and unfortunately, neither is the war. As there is no right answer when tackling the complex issues that stems from this conflict, no one solution can satisfy everyone. Nonetheless, before passing judgment, it must be understood that the situation is very nuanced. With uncertainty hanging in the air, all we can do is confront the challenges in the best way we see fit.