The French cement group Lafarge operated a plant in North Korea, but it was merely an illusion of control. The company inherited the asset when it acquired Egyptian construction group Orascom in 2008 and maintained a stake until 2017. Despite sending teams of auditors, Lafarge had little operational or financial control over the plant. This situation reflects the absurdity of doing business in unusual and restrictive environments like North Korea.
Similarly, western brands in Russia are facing a sense of unease as they navigate an increasingly restrictive regulatory environment. Despite the full-scale invasion of Ukraine 18 months ago, some companies have no intention of leaving Russia, such as German retailer Metro and US cigarette maker Philip Morris. These companies are grappling with issues such as a wartime economy and operating businesses that no longer truly belong to them.
Western companies in Russia also face financial challenges, as the Kremlin imposed a ban on dividends to businesses from “unfriendly” countries like the US, UK, and EU members. The Kyiv School of Economics estimates that these companies accumulated $18bn in profits and $199bn in revenues in 2022 alone. The Kremlin partly relaxed the rules but imposed stringent conditions, ultimately deciding who gets access to their money. It is now too late for companies to withdraw from Russia and extract significant value, as any sale requires Kremlin approval with hefty discounts and contributions to the state budget. The Russian government’s hardline approach is expected to continue, potentially including asset seizures. Western companies that remained in the Russian market will likely have to accept that they cannot repatriate their profits.