London
CNN
—
A tentative thaw in ice-cold US-Russia relations is paving the way for American companies to do what, until recently, seemed unthinkable — return to the country three years after they left in droves.
Following watershed talks with Russian officials last week, US Secretary of State Marco Rubio extolled the “extraordinary opportunities,” economic and geopolitical, that the United States and Russia could both seize once the war in Ukraine was over. And, on Monday, US President Donald Trump said he was “trying to do some economic development deals” with Moscow.
But the scale of the corporate exodus from Russia after it invaded Ukraine in 2022 could make that project harder, with few American companies left in the country to strike any deals. More than 1,000 global companies have either voluntarily exited or curtailed operations in Russia since then, according to a list compiled by the Yale School of Management.
Kirill Dmitriev, head of the Russian Direct Investment Fund, said he expects some American companies to return as soon as the second quarter, according to comments cited by Russian state media agency TASS last week.
Analysts are dubious, however, arguing that the reward for re-investing in Russia would be too small for companies to justify the potential costs of doing so.
“I am skeptical that many companies would risk their reputation and risk going into this very unsafe and risky business environment for this relatively small market,” said Janis Kluge, a researcher at the German Institute for International and Security Affairs, or the SWP.
“It’s still too toxic for American businesses to make a lot of money there,” he told CNN.
Russia has long been a challenging place to do business.
“There were constant problems previously in terms of corruption, bureaucracy, red tape (and) dealing with the Kremlin,” said Timothy Ash, a Russia specialist at Chatham House, a London-based think tank, and a senior strategist at RBC Bluebay Asset Management.
But since the invasion — and the battery of economic sanctions imposed by the West on Russia — the country has become an even trickier place for companies. Probably the biggest risk now facing foreign firms is the prospect of the Kremlin seizing their assets.
In 2023, Russian President Vladimir Putin signed a decree allowing the government to place foreign assets in the country under its temporary control. Months later, the Kremlin nationalized the local assets of French yogurt maker Danone and Danish brewer Carlsberg.
Corruption has also worsened from already high levels. In 2021, non-profit organization Transparency International put Russia in 136th place, tied with Liberia, in its ranking of 180 countries and territories for their perceived levels of public sector corruption. By 2024, Russia had slid further down the Corruption Perceptions Index to 154th place, tied with Azerbaijan, Honduras and Lebanon.
Meanwhile, Russia’s economy has become less integrated with the rest of the world, said Kluge at the SWP, owing, in large part, to sanctions.
Notably, shortly after the invasion, the United States, the EU, Britain and Canada jointly banned some Russian banks from the SWIFT messaging service — a high-security network connecting thousands of financial institutions around the world. That has made it far more difficult for those banks to send and receive money from abroad.
The United States wouldn’t be able to re-admit banned banks to the network without cooperation from the EU because SWIFT is based in Belgium, added Kluge.
Similarly, even if the United States lifts its sprawling set of export controls and asset freezes imposed on Russia since February 2022, its major trading partners will not necessarily reverse their own measures against Moscow. On Monday, the European Union approved its 16th batch of sanctions against Russia.
“It has become very expensive and cumbersome to make even a transaction in Western currencies from (inside) Russia,” Kluge said, noting that sanctions had “made continuing business in Russia untenable for many Western companies.”
Russia is no longer an “obvious place to make money” for foreign companies, according to Elina Ribakova, senior fellow at the Peterson Institute for International Economics, based in Washington, DC. And it hasn’t been so for about a decade, she told CNN.
The heyday of the Russian economy — which Ribakova puts between the early 2000s and around 2014 — coincided with booming oil prices. Moscow profited by exporting vast quantities of its oil and natural gas to the rest of the world during that time, including the United States. A sizable proportion of the foreign companies that set up in Russia were energy producers, as well as retailers hoping to sell their wares to the country’s burgeoning middle class, she said.
Now, “the tables have shifted dramatically” since America no longer needs Russia’s natural resources.
America now not only produces far more oil and natural gas than in previous decades, but it also exports the fuels and so directly competes with Russia in the global energy market.
For example, Europe has increased its imports of American liquefied natural gas — a chilled form of natural gas that can be transported on ocean-going tankers — to replace supplies traditionally imported from Russia.
The war has also shrunk Russia’s middle class, said Ribakova. Many people are fighting or have died on battlefields in Ukraine, or left the country at the outset of the invasion, although wages have grown because of severe labor shortages.
The whole economy is now driven by the military-industrial complex, said Ribakova. And that’s a sector where the United States and Russia are unlikely to find “natural cooperation,” she noted.
For foreign companies, boomeranging back to Russia would, quite simply, not be worth the hassle.
A major headache for returning companies would be the likely fragility of any diplomatic détente between Moscow and Washington, analysts told CNN.
“What happens if the Russian attitude (toward the United States) changes?” said Ribakova. “Maybe they give (it) the red carpet today. And what happens tomorrow? It is highly unpredictable.”
The uncertainty would work both ways, argued Michael Rochlitz, an associate professor in the economies of Russia, Eastern Europe and Eurasia at Oxford University.
“With the Trump administration, every day, every week, (it) changes a lot. So do you really want to make investments based on these erratic policies?” he said. “What happens in four years’ time if there’s a Democratic president?”
Rochlitz sums up the situation awaiting businesses returning to Russia bluntly: “High-risk, low-profit.”