The return of US President Donald Trump to the White House was welcomed by many, especially after his pledge to quickly end the conflict in Ukraine, this sparked an early wave of enthusiasm about the possibility of Western companies returning to Russia. However, the reality is different.
According to Russian government officials, Moscow is erecting obstacles to the return of thousands of companies that ceased operations or sold their assets in the country after Russia launched its military attack on Ukraine.
Western companies seeking to regain market share face difficult negotiations, huge piles of paperwork, and reputational risks, including for companies that signed buyback agreements upon their exit.
But the return will not be easy, as the government seeks to maintain control over strategic sectors and promote domestic production and companies.
“Russian authorities will not cancel the options concluded by withdrawing foreign companies with Russian companies, but they will put forward additional demands for their implementation,” Alexei Yakovlev, head of the Finance Ministry’s Fiscal Policy Department, said on the sidelines of a financial forum in Moscow in early April.
According to Russian and Western media reports, a small number of companies are conducting confidential inquiries, but there are no serious plans in place given the continued widespread Western sanctions.
Local companies that replaced Western companies after their departure are pressuring the government to put obstacles in the way of their return.
In March, Russian President Vladimir Putin warned that companies that “defiantly closed their doors” upon their departure would not be allowed to buy back their businesses for small sums or replace local operators.
AvtoVAZ, Russia’s largest automaker, stated that Renault faces a bill of at least $1.37 billion to cover investments made since the french automaker sold its majority stake for just one ruble in 2022.
Since the departure of Western companies from Russia, Chinese automakers have dominated the sector with a market share of more than 50%, up from less than 10% before 2022, virtually shutting the door on Western competitors.
“The market has changed,” said Alexei Podshikoldin, head of the Russian Automobile Dealers Association. “I don’t know if the Europeans will succeed,” he added, noting that they will need to offer cars of the same quality without increasing prices, according to Reuters.
The return of Western companies to Russia does not appear to be an option at the moment, due to the numerous conditions imposed by the government on companies that left Russia at the beginning of the war with Ukraine, as well as US pressure preventing their return.
Trump’s imposition of tariffs on imports has European automakers sounding the alarm. After losing tens of billions of dollars in investments in Russia, they are now on the verge of losing further market share in the United States and globally.
The conflict in Ukraine between the West and Russia, and the ongoing dispute between China and the United States, have made Europe the biggest loser economically and politically.
If the situation continues, many European companies may declare bankruptcy.
