French companies still active in Russia are playing the clock

Leroy Merlin, Renault and Auchan. On Wednesday, Volodymyr Zelensky mentioned only these three names to French parliamentarians. Three companies that the Ukrainian president asked to leave Russia to no longer be “sponsors of the war machine”. Their response was mixed. “Shocked,” Philippe Zimmermann, the head of Leroy Merlin’s holding company (and of which the Mulliez group is a majority shareholder), still plans not to close its brand in Russia. Auchan, who also belongs to the Mulliez group, did not respond. Renault, on the other hand, announced in the wake of suspending activity at its Moscow plant and evaluating “the possible options” regarding its subsidiary AvtoVAZ.

But these three are not the only ones still operating in Russia. Before the outbreak of the war, 35 of the 40 CAC 40 companies were present in the country, and no less than 160,000 people were dependent on a French employer. Most companies postpone in the hope of a quick end to the conflict. Currently, three French companies have announced a net withdrawal, ten have suspended their activities, two have reduced their fleet, six have suspended their investments and four have not changed anything as usual, according to the census conducted by the US university Yale, which shows the announcements from multinational companies .

The situation is difficult to defend

On Wednesday, Zelensky cited neither TotalEnergies, which concentrates criticism due to the maintenance of its gas activities, nor Société Générale. The French bank has 12,000 employees in Russia, 230 branches and 2 million customers through the Rosbank network, acquired from 2006 through an investment of 4 billion euros. The first foreign bank in Russia, it became profitable in 2016, and its parent company decided two years ago to continue its expansion. Rosbank is at the heart of Putin’s economy: Last year, it participated in a € 1.2 billion loan to mining giant Uralkali and financed € 850 million worth of city projects in Moscow. This puts Société Générale in a situation that is difficult to defend against Western public opinion.

The group led by Frédéric Oudéa has not yet announced any decision on the future of Rosbank. “At the moment, we are managing the crisis,” said one in the wake of the CEO. But there will be no status quo. We are a responsible bank. “A subdued way of saying that a withdrawal is under investigation while Crédit Agricole and BNP Paribas have withdrawn. On March 3, Société Générale explicitly developed the scenario with an expropriation and quantified the impact on its equity to 1 , 8 billion euros.A shock that she, according to herself, is “completely capable of absorbing.” The financial markets are more cautious: Since the attack on Ukraine, the share price of Société Générales has lost more than 20% of its value.

Other companies are currently playing. With its 7,200 employees in the country and its thirteen production sites, Danone explains that it maintains its activities “to meet the basic food needs of the civilian population”, but has suspended its investment projects. Russia provided 1.5 billion euros in revenue to the agri-food company in 2021 (6% of its revenue). Accor, 57 hotels operated in the country, and Sanofi, 575 million euros in revenue in the area by 2021, have adopted similar lines.

Many companies that had not left Russia hoped to develop strongly there in the coming years. This is the case with Saint-Gobain, which has eight production sites and 1,500 employees in Russia (1.5% of its turnover, 230 million euros). Last year, the building materials group announced an investment plan of 70 million euros and the opening of four new factories. “All these projects have been stopped, we say at Saint-Gobain. Local activities continue to operate, but independently: there are no more import or export flows, production is sold in the local market.” Does President Zelensky’s interrogation on Wednesday make Saint-Gobain think? “He did not quote us,” the group replies. “For the time being, we are sticking to our position.”

Rejection of instructions

“All options are currently being explored and this includes stopping activity in the country,” an Air Liquide spokesman said without specifying when a decision could be made. She points out that one of the group’s activities is to supply hospitals with medical oxygen. In Russia, Air Liquide employs 710 people, operates eighteen industrial plants, has 700 customers and generates just under 1% of its turnover there. So far, the company has settled for a suspension of investments and development projects. In recent years, its presence in Russia has been strengthened: it started two units up in 2021 and announced an investment of 100 million euros in 2020, signed a supply contract with the Russian steel producer NLMK.

Even those who have ceased their activities have not gone forever. Michelin, for example, closed the chains at its Davydovo tire factory on March 15, while continuing to pay the 750 employees. Is this situation sustainable? “We are focused on day-to-day management and staff support,” said a spokesman for the first foreign producer to return to Russia in 2004.

The companies that remain active in Russia invoke the same arguments: their departure would open the door to confiscation of their assets and enrichment of the oligarchs, would be tantamount to punishing the Russian people, and the first victims would be their employees. They also hide behind the “advice” given by the President of the Republic.

Philippe Zimmermann, from Leroy Merlin, thus assured in an interview with Voix du Nord that if Emmanuel Macron asked the brand to leave the Russian market, “it would be different”. Except that the head of state refuses to give instructions to companies to which he only asks to comply with the sanctions. “My position is to let companies decide for themselves,” he said Thursday night in Brussels. Before the war, France was number two among foreign investors in Russia.

Leave a Comment