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27 Apr 2022

Jeffrey Sonnenfeld, Steven Tian & Steven Zaslavsky in The Washington Post

Opinion: Businesses that refuse to leave Russia are experiencing the greatest costs

26 April 2022

A spate of misleading headlines in recent days have harped on the supposed heavy financial costs that companies are bearing for withdrawing from Russia. This has it exactly wrong. Companies that have exited Russia are not only accruing substantial costs; they are also showing financial benefits. And those that refuse to leave are experiencing the greatest costs.

One recent, much-discussed case illustrates this well: Societe Generale’s stock price jumped 5 percent earlier this month after it announced it was leaving Russia despite incurring a $3.4 billion write-down. This is only the tip of the iceberg...

Some have suggested that companies that draw large proportions of their revenue from Russia might be more hesitant to leave Russia or that these Russian-reliant companies would suffer more financially, yet our research shows that companies that draw upward of 5 percent of revenue from Russia have not differed in total returns from those that draw less...

For example, ExxonMobil stock has increased by 13 percent since the invasion despite writing off billions in Russian assets and forswearing its profitable Russian operations. Meanwhile, Kinross Gold has gone up by 13 percent even though it exited its investment in the Russian Kupol gold mine, which accounted for 20 percent of its revenue. Even BP, which took a hefty $25 billion hit by writing down its holdings in Rosneft, is in the green.

Thus, contrary to media narratives, when it comes to companies exiting Russia, the focus should not be on their lost revenue or the assets they had to write off. Russian revenue makes up a small percentage of most companies’ revenue. And even for the multinational companies that previously drew significant revenue from Russia, investors are clearly much more concerned with the far more important reputational risk of funding the Putin regime and with the potential for large-scale corporate boycotts around the world.

In other words, the far more dangerous financial threat to shareholders is remaining in Russia — not with writing off Russian assets. Those companies that have stayed their course should take note.