SOCIETY
The Kremlin Using Carrots and Sticks to Bring Back Western Companies
April 4, 2025
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Vladimir RuvinskyJournalist
Journalist Vladimir Ruvinsky argues that the return of Western firms is an important objective for the Kremlin. They imported technology and practices that Russian business benefited from and that cannot be easily replaced by Chinese newcomers.
The original text in Russian was published in the Moscow Times and is being republished here with the author’s permission.
The hypothetical return of Western companies to Russia is a topic of considerable importance for the Kremlin. First, the idea was cultivated in the public space that many European and US companies are eager to come back. Then, a dealmaking posture was adopted: since you need Russia so bad and you are asking to be let back in, the Kremlin will decide which companies and on what terms.
In March, Vladimir Putin ordered that such terms be formulated, even though no US or German companies have publicly voiced an intention to return to Russia (in early April, Deputy Finance Minister Ivan Chebeskov reported the Ministry of Finance had not yet received requests from foreign businesses wishing to restart operations in Russia – RP). Companies are not lining up at the Kremlin gates.
The ease with which the Russian authorities essentially nationalized the assets of departing Western companies has naturally deterred them. Meanwhile, the frequency and intensity with which the topic of a “comeback” is discussed in Russian progovernment media indicates the Kremlin’s strong wish for Western businesses to return. Whom are these urgent signals for? And why? This is especially curious given the Kremlin’s proclaimed political, trade and economic “pivot to the East.”
The hypothetical return of Western companies to Russia is a topic of considerable importance for the Kremlin. First, the idea was cultivated in the public space that many European and US companies are eager to come back. Then, a dealmaking posture was adopted: since you need Russia so bad and you are asking to be let back in, the Kremlin will decide which companies and on what terms.
In March, Vladimir Putin ordered that such terms be formulated, even though no US or German companies have publicly voiced an intention to return to Russia (in early April, Deputy Finance Minister Ivan Chebeskov reported the Ministry of Finance had not yet received requests from foreign businesses wishing to restart operations in Russia – RP). Companies are not lining up at the Kremlin gates.
The ease with which the Russian authorities essentially nationalized the assets of departing Western companies has naturally deterred them. Meanwhile, the frequency and intensity with which the topic of a “comeback” is discussed in Russian progovernment media indicates the Kremlin’s strong wish for Western businesses to return. Whom are these urgent signals for? And why? This is especially curious given the Kremlin’s proclaimed political, trade and economic “pivot to the East.”
Vkusno i tochka ("Tasty, period") is a Russian fast food chain based mostly in former McDonald's restaurants and serving rebranded McDonald's items. McDonald's pulled out of Russia after the war started. The first Vkusno i tochka restaurants were opened on June 12, 2022. Source: VK
Domestic opposition to return of Western companies
Putin claims that “certain” Western companies are already in negotiations to return to Russia. Whether this is true remains to be seen, but one can infer from such statements the Kremlin’s plan to create a backdrop stressing the failure of the international sanctions imposed over its invasion of Ukraine.
It would be a big oversimplification to assert there is unanimous agreement within Russia’s political and economic establishment on the need to bring back the Western companies that exited. More than a thousand companies left. Who should be invited back?
Of the Western companies that operated in Russia before the war and have headquarters in countries later deemed “unfriendly” by the Kremlin, over 60% exited, according to the auditing firm “Kept” – formerly the Russian branch of the London-based KPMG.
Some Western companies, such as France’s Danone, Denmark’s Carlsberg, Germany’s Uniper and Finland’s Fortum, had their assets in Russia seized by the Russian government and sold to local buyers (see Russia.Post here). Ramzan Kadyrov, whose nephew took over Danone, is one of those in the elite who are unlikely to welcome back Western firms.
Putin claims that “certain” Western companies are already in negotiations to return to Russia. Whether this is true remains to be seen, but one can infer from such statements the Kremlin’s plan to create a backdrop stressing the failure of the international sanctions imposed over its invasion of Ukraine.
It would be a big oversimplification to assert there is unanimous agreement within Russia’s political and economic establishment on the need to bring back the Western companies that exited. More than a thousand companies left. Who should be invited back?
Of the Western companies that operated in Russia before the war and have headquarters in countries later deemed “unfriendly” by the Kremlin, over 60% exited, according to the auditing firm “Kept” – formerly the Russian branch of the London-based KPMG.
Some Western companies, such as France’s Danone, Denmark’s Carlsberg, Germany’s Uniper and Finland’s Fortum, had their assets in Russia seized by the Russian government and sold to local buyers (see Russia.Post here). Ramzan Kadyrov, whose nephew took over Danone, is one of those in the elite who are unlikely to welcome back Western firms.
“The exit of Western competitors has been beneficial for certain Russian businesses.”
The beneficiaries of the war environment included not only companies fulfilling state defense contracts but also sectors focused on consumption – light industry, banks and food production.
Less competition has helped these companies to increase profits and expand their market share in the country (and, from the government’s standpoint, pay more taxes). The Russian Ministry of Industry and Trade has even come out against encouraging the return of foreign brands whose market niches were filled by local companies.
Why invite companies back? And which ones?
The main reason for the persistent interest of the Russian authorities was laid out by Prime Minister Mikhail Mishustin on March 26: they want Western companies to localize production and invest in Russia. In other words, the Kremlin is offering to welcome back Western companies that departed, provided they bring with them both technology and money. This is precisely what European and, more broadly, Western companies gave Russia before the war – and what the Russian “civilian” side of the economy has been lacking since the full-scale invasion of Ukraine.
Less competition has helped these companies to increase profits and expand their market share in the country (and, from the government’s standpoint, pay more taxes). The Russian Ministry of Industry and Trade has even come out against encouraging the return of foreign brands whose market niches were filled by local companies.
Why invite companies back? And which ones?
The main reason for the persistent interest of the Russian authorities was laid out by Prime Minister Mikhail Mishustin on March 26: they want Western companies to localize production and invest in Russia. In other words, the Kremlin is offering to welcome back Western companies that departed, provided they bring with them both technology and money. This is precisely what European and, more broadly, Western companies gave Russia before the war – and what the Russian “civilian” side of the economy has been lacking since the full-scale invasion of Ukraine.
“European companies that localized in Russia were of particular interest to the Kremlin and their Russian competitors for the production technology they brought with them.”
Sure, the new owners have found some replacement components from Turkey or China, as a knowledgeable economist told your author. But nothing more.
In September 2022, Putin announced a “pivot to the East” to attract investment, gain access to the latest technology and establish high-value-added production. But the Chinese have been lukewarm on investing in Russia, and there has been no visible technology transfer of scale. Meanwhile, with the Europeans – despite all their stringent requirements and competition – technology was transferred.
Putin’s statement that preferences for Russian businesses ought to be maintained is, from the Kremlin’s perspective, part of the effort to bargain with Western companies for their technology.
Yet the Russian owners who were gifted Western assets and/or new markets, despite all the benefits they gained from the exit of their competitors, also stand to benefit from updated technology and practices in Russia.
In September 2022, Putin announced a “pivot to the East” to attract investment, gain access to the latest technology and establish high-value-added production. But the Chinese have been lukewarm on investing in Russia, and there has been no visible technology transfer of scale. Meanwhile, with the Europeans – despite all their stringent requirements and competition – technology was transferred.
Putin’s statement that preferences for Russian businesses ought to be maintained is, from the Kremlin’s perspective, part of the effort to bargain with Western companies for their technology.
Yet the Russian owners who were gifted Western assets and/or new markets, despite all the benefits they gained from the exit of their competitors, also stand to benefit from updated technology and practices in Russia.
The automotive plant Moskvich (formerly Renault Russia). In July 2022, after Renault announced it was leaving Russia, the KAMAZ and the Moscow city government agreed on an even split of the capital in the Moskvich plant. Source: Wiki Commons
Chinese help has not materialized
At the outset of the conflict, China was presented as a potential savior not only for the Russian consumer market. Following the departure of Siemens from Russia, progovernment economists voiced hopes that the “pivot to the East” would also help develop infrastructure, transportation and logistics. But these hopes proved unfounded (though the Chinese have slapped the Moskvitch logo on cars they produced).
It has become apparent that the Chinese, unlike the demanding Europeans, were not eager to import technology and machinery that might enhance the competitiveness of Russian production not controlled by China.
At the outset of the conflict, China was presented as a potential savior not only for the Russian consumer market. Following the departure of Siemens from Russia, progovernment economists voiced hopes that the “pivot to the East” would also help develop infrastructure, transportation and logistics. But these hopes proved unfounded (though the Chinese have slapped the Moskvitch logo on cars they produced).
It has become apparent that the Chinese, unlike the demanding Europeans, were not eager to import technology and machinery that might enhance the competitiveness of Russian production not controlled by China.
“But Russians should not take it personally – China has a fundamentally different approach to doing business and running infrastructure projects in foreign countries.”
A classic example is Sri Lanka, where a deal was signed with Beijing for an oil refinery, highways, a port and an airport, at a total cost of about $5.5 billion. The Chinese government provided loans to the Sri Lankan government, and Chinese companies were responsible for the construction.
In other words, Chinese workers implement Chinese-led infrastructure projects in foreign countries, funded by loans from Chinese banks. Then, Chinese laborers are brought in to work in the factories. In the Sri Lankan case, the country defaulted on its foreign debt in 2022. At that time, the country's total foreign debt was $46.9 billion, 52% of which was owed to China.
In this Chinese model, money from loans provided by Beijing almost never enters the host economy, while the host government is saddled with interest payments. Overall, the gains for the host country are minimal. Russia will not accept this model.
Furthermore, large Chinese firms are hesitant to engage in investment projects in Russia given the risks involved, as a Russian economist with knowledge of the matter says.
Thus, the Chinese buy up Russian commodities low and sell everything they can in Russia high, especially consumer goods, like cars.
Equipment for producing elevators, for example, is not one of those things, and so Russia was forced to extend the service life of 64,000 elevators in apartment buildings. Russian enterprises do not have their own capacity to make new elevators, and there is no money to buy them in China or Turkey.
Military technology is a separate story
In other words, Chinese workers implement Chinese-led infrastructure projects in foreign countries, funded by loans from Chinese banks. Then, Chinese laborers are brought in to work in the factories. In the Sri Lankan case, the country defaulted on its foreign debt in 2022. At that time, the country's total foreign debt was $46.9 billion, 52% of which was owed to China.
In this Chinese model, money from loans provided by Beijing almost never enters the host economy, while the host government is saddled with interest payments. Overall, the gains for the host country are minimal. Russia will not accept this model.
Furthermore, large Chinese firms are hesitant to engage in investment projects in Russia given the risks involved, as a Russian economist with knowledge of the matter says.
Thus, the Chinese buy up Russian commodities low and sell everything they can in Russia high, especially consumer goods, like cars.
Equipment for producing elevators, for example, is not one of those things, and so Russia was forced to extend the service life of 64,000 elevators in apartment buildings. Russian enterprises do not have their own capacity to make new elevators, and there is no money to buy them in China or Turkey.
Military technology is a separate story
“The Russian military-industrial complex is finding workarounds to bring in European and US technology, instead of relying only on Chinese solutions.”
Take advanced chips. They can be brought into Russia in exchange for a suitcase of cash, which makes it difficult for Americans and Europeans to control such transactions. While such schemes cannot support the entire economy (or even procure elevators for the entire country), they work for the production of, say, drones and missiles. Moreover, a large part of the Russian military-industrial complex continues to operate on Soviet-era technology.
Because the military-industrial complex remains a political priority for the Kremlin, the government will continue to allocate significant resources for modern weapons, meaning secret imports of the latest equipment and technology will continue. They will suffice to maintain production – but nothing more.
Ariston as a trial balloon
US companies see restarting operations in Russia as highly risky, with the risks compounded by the unpredictability of Trump. A knowledgeable economist suggested to your author that no rational US company, including those in the tech sector, “would even dare to undertake anything serious in Russia” at this time.
As for European companies, the situation is more complicated. The US never had particularly close economic ties with Russia, but Europe did. After Russia’s full-scale invasion of Ukraine, many European companies froze their operations or have been operating quietly, trying to avoid attention. This is because leaving would mean losing a lot.
Putin is using a combination of carrots (we will give back everything) and sticks (we will seize everything) to get Western companies back. Products from Siemens, for example, which supplied Sapsan high-speed trains to Russia before the war, are much needed. It is no coincidence that on March 26, Putin revoked his decision from two years ago for the temporary nationalization of a plant belonging to Italy’s Ariston near St Petersburg.
The issue with Ariston, as well as with a seized Bosch plant also near St Petersburg, is its factory cannot fully produce household appliances without a flow of technology from the parent company. And China is no help in this regard. Gazprom Household Systems, the subsidiary of Gazprom that took over Ariston’s assets in April 2023, has been unable to resolve the problems. Thus, it is in Putin’s interest to give these plants back to their original owners.
The Ariston case represents an attempt by the Kremlin to start a chain reaction within European business. However, which companies that exited Russia and lost tens or hundreds of millions of euros would, in their right minds, return to Russia with investment and technology?
Ariston has already expressed gratitude for the return of its assets, while also stating that it will “fully comply” with existing sanctions.
Overall, the departure of European companies from Russia was a strategic move, not a tactical one. The fundamental issues related to the war remain, and there are no signs that Europe intends to ease the sanctions regime. As long as this situation persists, who would invest in Russia? The Kremlin’s wish to import new Western technology remains, for now, just a wish.
Because the military-industrial complex remains a political priority for the Kremlin, the government will continue to allocate significant resources for modern weapons, meaning secret imports of the latest equipment and technology will continue. They will suffice to maintain production – but nothing more.
Ariston as a trial balloon
US companies see restarting operations in Russia as highly risky, with the risks compounded by the unpredictability of Trump. A knowledgeable economist suggested to your author that no rational US company, including those in the tech sector, “would even dare to undertake anything serious in Russia” at this time.
As for European companies, the situation is more complicated. The US never had particularly close economic ties with Russia, but Europe did. After Russia’s full-scale invasion of Ukraine, many European companies froze their operations or have been operating quietly, trying to avoid attention. This is because leaving would mean losing a lot.
Putin is using a combination of carrots (we will give back everything) and sticks (we will seize everything) to get Western companies back. Products from Siemens, for example, which supplied Sapsan high-speed trains to Russia before the war, are much needed. It is no coincidence that on March 26, Putin revoked his decision from two years ago for the temporary nationalization of a plant belonging to Italy’s Ariston near St Petersburg.
The issue with Ariston, as well as with a seized Bosch plant also near St Petersburg, is its factory cannot fully produce household appliances without a flow of technology from the parent company. And China is no help in this regard. Gazprom Household Systems, the subsidiary of Gazprom that took over Ariston’s assets in April 2023, has been unable to resolve the problems. Thus, it is in Putin’s interest to give these plants back to their original owners.
The Ariston case represents an attempt by the Kremlin to start a chain reaction within European business. However, which companies that exited Russia and lost tens or hundreds of millions of euros would, in their right minds, return to Russia with investment and technology?
Ariston has already expressed gratitude for the return of its assets, while also stating that it will “fully comply” with existing sanctions.
Overall, the departure of European companies from Russia was a strategic move, not a tactical one. The fundamental issues related to the war remain, and there are no signs that Europe intends to ease the sanctions regime. As long as this situation persists, who would invest in Russia? The Kremlin’s wish to import new Western technology remains, for now, just a wish.
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