Even as the war in Ukraine grinds on, some multinational companies are quietly positioning themselves for a thaw in relations with Russia.
Authors
- John Luiz
Professor of International Management and Strategy, University of Sussex
- Helena Barnard
Director: Doctoral Programme, Gordon Institute of Business Science, University of Pretoria
Many of those who rushed to divest from the country, selling off assets after the full-scale invasion in 2022, may now be reassessing their options. It's also becoming clear that some of these companies never completely left to begin with.
What is apparent is that divestment was, in many cases, provisional rather than permanent - with firms embedding "buy-back" clauses in their sales contracts, or structuring their exits in ways that would make future re-entry simple.
This should not come as a surprise. Our research into foreign divestment from apartheid-era South Africa shows this is a well-trodden business path.
In South Africa, sanctions inadvertently strengthened local white business elites aligned with the ruling regime. Multinationals sold their assets under pressure - often at discounts, often to the local companies of politically connected elites - and later bought them back at a premium.
Today, the same dynamic could be playing out in Russia.
When Russia invaded Ukraine in 2022, more than 1,600 multinational enterprises announced they were pulling out of the country. However, reports last year suggested that 2,175 foreign companies , including some who had announced they were pulling out, remained in Russia - and were becoming increasingly open about their operations.
One CEO stated that investors did not "morally care" about doing business in Russia, and that if they pulled out, rivals would simply take their place.
Even for those companies that did leave, many of these exits were more symbolic than substantial. Research has shown that even companies that claimed to have fully divested left behind options to return .
Carmaker Nissan, for example, appears to have sold its Russian subsidiary to state-owned NAMI in 2022 with a six-year buy-back clause. In a statement at the time , the company said the terms allowed it "the option to buy back the entity and its operations within the next six years".
And fast-food giant McDonald's can reportedly reacquire its Russian business within 15 years. A statement from McDonald's in 2022 said that, for the first time in its history, it was "de-Arching" a major market - but suggested it hoped to return eventually.
Such arrangements, often quietly written into exit contracts, allow multinationals to comply with sanctions in the short term - while keeping the door open for a future comeback.
In many cases, the operations have continued seamlessly under new ownership. While the brand names may have changed in Russia, the staff and product designs remain almost identical. And sometimes, the foreign supply chains and intellectual property are still in play too.
Who profits?
The South African precedent is instructive. During the 1980s, foreign companies divested under pressure from shareholders, activists and governments over apartheid. But very few truly left. Most sold their operations to local elites - powerful business groups aligned with the ruling regime. They then continued to supply products, license trademarks and support operations through quiet back channels.
The intention of sanctions is to weaken the sanctioned state. However, our study shows that the economic value created by foreign multinationals in South Africa did not disappear.
In Russia, foreign companies have sold assets at big discounts to Russian oligarchs and state-linked entities since 2022. In some cases, the buyers were longstanding local partners or franchisees. In others, they were entities unknown to consumers but which were thought to have close ties to the Kremlin.
The consequences are predictable. Rather than weakening the regime's economic base, sanctions may have consolidated it. As in South Africa, the departure of foreign firms appears to have strengthened domestic elites and allowed them to accumulate new assets and market power.
Some companies that left Russia are reported to be reconsidering their decisions . Negotiations are taking place behind the scenes about how to ree-stablish operations should conditions shift. Their re-entry may be smoothed by structures - buy-back clauses, licensing deals or local partnerships - that firms put in place on their way out.
This strategy mirrors what we found in South Africa. In the 1990s, once apartheid ended, foreign multinationals returned in large numbers. But they didn't start from scratch. They repurchased their former assets, often at a much higher price, from the local elites.
In short, in the case of South Africa at least, the period of supposed withdrawal was often one of careful preparation for re-entry. Meanwhile, our study also found that South African conglomerates used their windfalls to fund international expansion and entrench their power in the new economy.
Unintended results
Sanctions remain a key tool of international diplomacy. But our research shows their effectiveness depends heavily on how firms implement them - and who ends up with the assets that are divested. If those assets are consistently transferred to politically connected insiders, the long-term outcome may be to reinforce the very regimes the sanctions were intended to pressure.
Sanctions policy should not just consider whether firms have divested, but how and to whom. Without that, even the most well-intentioned measures may end up producing unintended results.
This means that governments should go beyond imposing sanctions and develop mechanisms to ensure transparency, monitoring and accountability in how corporate exits are structured.
South African sanctions are generally seen as having played a useful role in ending apartheid. But as unemployment and inequality continue to plague the country along old institutional lines, the South African experience offers a clear historical warning. If sanctions are meant to promote accountability and change, it's vital to pay close attention to what happens after the headlines fade.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
