Companies Pulling Out of Russia is Colossally Bad for the Russian Economy

Since Russia invaded Ukraine on February 24, 2022 without provocation, numerous western companies have been closing business in the Slavic nation.

McDonald and Renault are the latest to stop their investments in Russia.

McDonald’s is looking to sell its assets in Russia after 3 decades of successful business there. Announcing its departure from the Russian market, the company said, “It is no longer tenable, nor is it consistent with McDonald’s values.” The American fast-food enterprise announced in March that it was closing its stores in Russia. On Monday, the company admitted that it was looking for a prospective investor in Russia to buy off their assets.

The French Automaker Renault also announced on Monday that it had agreed to sell its business and its stake in Russian automaker AvtoVAZ. Renault Russia has been sold to Moscow City while the 67.69% interest in AvtoVAZ was sold to NAMI, a state-owned automotive research and development institution.

Other companies such as Aston Martin, Ferrari, Ford, General Motors, Lamborghini, Honda, Nissan, BAT, Unilever, Procter & Gamble among hundreds others have already left the Russian market.

This mass exodus out of Russia spells doom to the Russian economy, more so to millions of people who may face unemployment, high inflation, and reduced income.

To put things into perspective, McDonald’s has 850 restaurants across Russia, employing more than 62,000 people. This is a large number of people and families that could lose their means of livelihood.

McDonald’s has said that it is looking for an investor that will be able to keep these people and continue paying them, but the economy is already too constricted as a result of foreign sanctions and other reeling effects of the war. It is hard to get an investor that can bring more money into the declining stores. The government could save some jobs through subsidies and state-led investments, but as the war goes on, the government will surely exhaust its reserves.

Europe will soon stop buying oil and gas from Russia, while Asia and Africa are not sufficient markets for their natural resources.

As Russian troops lose their personnel and artillery, they become more desperate and Putin will increase funding for the war. The fight for Donetsk and Luhansk regions also continues to attract more sanctions from the United States and its allies.

Going forward, things will get worse for the aggressor, and unless China comes to its rescue in an unlikely change of mind, Russians might face one of the worst economic crises for years to come.

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