When Russia’s war on Ukraine began, it was British company BP that sounded the gong of the now widespread corporate exodus from Russia. Just days after the invasion, BP was the first major company to pull out of the country by offloading its stake in state-owned oil company Rosneft – thereby ending 30 years of cooperation with the Russian energy giant. The Western business world followed suit.
In fact, since then almost 1,000 companies have cut ties with Russia in some shape or form. One in ten of these are British businesses, the vast majority of which moved swiftly to take action, unlike French companies.
Only one British company bucked the trend and maintained business as usual: Mondi, the paper producer. However, even it has now bowed to public and political pressure, announcing on 5 May that it would divest its operations from Russia. The UK can now boast that all of its companies in Russia have taken action, something that most major Western countries cannot claim.
The last British company to withdraw from Russia
In many respects, it was a much easier decision for a monolith such as BP to leave Russia than it was for the likes of Mondi.
BP is a household name that exists squarely in the public eye. More still, it has long had uncomfortable ties with the Russian government. Igor Sechin, chairman of Rosneft, is a close ally of President Vladimir Putin, while the company is also the key supplier of fuel to the Russian army.
In other words, BP had no choice but to exit, whereas lesser known and less political companies such as Mondi could fly under the radar, thereby giving them more time and less pressure to take action.
Moreover, it is easier to be ethical when there is less to lose, which is why many of the companies that have taken the longest to withdraw from Russia are those with a higher level of market penetration in the country. Mondi is one such business, as are many of the large French players that have yet to budge.
A global leader in packaging and paper, Mondi operates across more than 30 countries, but a chunky 12% of its overall revenues (€6.66bn) come from its large Russian operations, which began 22 years ago.
Its most significant facility is a packaging paper and paper mill located in Russia’s Komi Republic. The group also has three converting plants elsewhere in the country. All these facilities primarily serve the domestic market and have continued to operate during the war on Ukraine (while Mondi’s Ukrainian plant has been put on pause). All in all, the company employs around 5,300 people in Russia, with a net asset value on its books of nearly €700m ($735.85m).
Why has Mondi chosen to act?
All of this is now set to go. After two months of deliberation, Mondi announced in early May that it will divest all of its Russian operations.
"The divestment process for these significant assets is operationally and structurally complex and is being undertaken in an evolving political and regulatory environment," the company said in a statement. "Accordingly, there can be no certainty when a transaction will be completed or as to the structure of any possible transaction."
Mondi also reiterated its stance on the conflict, saying: “[We] remain profoundly concerned about the war in Ukraine and [are] shocked by the humanitarian impact. We express our deepest sympathy to all those affected by the ongoing hostilities, reiterating our call for an urgent cessation and a peaceful resolution.”
While moral outrage against Putin's war played an ostensible role in Mondi's decision to divest, reputational and practical factors were definitely at play.
In a 10 March press release, the company described how its paper mill was "starting to see a number of operational constraints, including in the importing of process chemicals, spare parts and other critical supplies. While difficult to assess the ramifications in what remains a fast-moving situation, this may significantly impact the operation of the mill."
The case of Mondi's comparatively slow exit highlights the very different dynamics of pressures being placed upon lesser-known foreign companies in Russia, or those with a large market share in the country. Whatever a company's size, however, the inexorable and ethical conclusion remains the same: exit Russia. British companies have understood this faster than others.