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Stay or go? The dilemma of Swiss companies in Russia

Foreign Minister Ignazio Cassis inaugurating the new Swiss embassy in Moscow, on June 18, 2019. Many representatives of Swiss firms active in Russia attended the event. Keystone / Yuri Kochetkov

After Russia’s invasion of Ukraine, several Swiss companies suspended their activities in Russia. Others pulled out for good, while for others it was business as usual. Given that there’s “no ethical justification” for staying in Russia, as one management professor told us, we asked some 20 companies to explain their strategy.

In June 2019 Swiss Foreign Minister Ignazio Cassis and his Russian counterpart Sergei Lavrov inaugurated the new Swiss embassy in Moscow with a toast. The party cost an estimated CHF700,000 ($720,000), a large chunk of which was provided by private sponsors. These included Swiss-based companies controlled by Russian oligarchs such as Eurochem, Andrey Melnichenko’s fertiliser giant from Zug, Gennady Timchenko’s Volga Group, as well as Sulzer and OC Oerlikon, the two historical brands of Swiss industry in which Viktor Vekselberg is a shareholder. Supporters also included Nord Stream 2, the Baar-based company in canton Zug that operates the gas pipeline linking Russia to Germany and of which Gazprom, the Kremlin-owned gas giant, is the main promoter. Several large Swiss groups were also on the list, which SWI has seen: Glencore, Sika, UBS, ABB, Philip Morris, Schindler, Nestlé, Lafarge Holcim, Omya, MSC and others.

At the time, Swiss companies had a strong presence in Russia, where they were investing in opening new factories, acquiring local companies or jumping headlong into the race for raw materials.

Less than three years later, the war unleashed by Russia on Ukraine means not much remains of that friendly environment. Europe and the United States, followed by Switzerland, imposed a series of sanctions on Russian companies and the assets of oligarchs and their families. These have pressured the oligarchs in Switzerland. Meanwhile Nord Stream 2 declared itself bankrupt.

Swiss companies are also under pressure to comply with sanctions. While Russia remains a relatively minor partner for Switzerland in terms of imports and exports of goods, in certain areas trade is more significant, especially in raw materials. These are traded by companies based in Geneva, Zug or Lugano. Swiss investments in Russia are also considerable. They are estimated by the newspaper 24 heuresExternal link at CHF28 billion (about 2% of the total amount held abroad by Swiss companies). According to the Swiss State Secretariat for Economic Affairs (SECO), around 200 companies in Switzerland employ around 40,000 people in the Russian food, pharmaceuticals, logistics, construction and raw materials sectors.

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All these companies have condemned the war. In the weeks following the outbreak of the conflict, many multinationals announced their desire to leave Russia – an exodus that included many Swiss companies. But leaving a country where so much money has been invested and where companies could have hundreds of employees is not so easy. Not least because the Russian authorities are not standing idly by and intend to introduce a law aimed at confiscating abandoned assets.

SWI contacted about 20 companies to understand their position. In general, the answers we received were the same: we are against the war, we have stopped investments and we are monitoring the situation, taking into account both sanctions and contractual obligations.

‘Cosmetic operation’

Since the beginning of the war Jeffrey Sonnenfeld, a professor at Yale School of Management, has become a bogeyman – not so much for his students as for the managers of dozens of multinationals around the world. Together with his team, he publishes on the university website a list of companiesExternal link that have withdrawn from or remained in Russia during the conflict. The list is continuously updated and comprises more than 1,000 companies categorised into five groups: from those that have abandoned the country completely to those that have taken no action at all.

“I thought the university could offer its experience and objectivity to separate in a meaningful way the companies that are actually leaving Russia from those who are simply engaging in a cosmetic operation, a bit like greenwashing in the context of climate change,” Sonnenfeld told SWI


The list has caused such a stir that Sonnenfeld is harassed by platoons of communications experts and lawyers trying to get their companies removed from the list.

“In every single case our extensive research provides us with solid, irrefutable facts,” he says. “There is no ethical justification for staying in Russia. The pharmaceutical and food industries have continued to supply non-essential products. We need to break through Putin’s propaganda to make civil society aware and to show average Russians that they have become a rogue nation to the world.”

Swiss companies

Among the companies on the list are several from Switzerland. Some are leaving Russia, or at least limiting their presence. Switzerland’s leading financial institutions, UBS and Credit Suisse, as well as industrial giant ABB, are putting new business on hold, stopping some current operations and services, and helping clients reduce their exposure to Russia, Sonnenfeld’s research shows.

“Of course, it took the encouragement of sanctions, but there is a moral – and also economic – imperative to shutting things down before it’s too late. Financial capital and industrial assets have a big effect on the economy and the more these companies and others like them act, the sooner we will see a change,” he says.

Other companies have been more hesitant. Among those who continue business as usual is Ems-Chemie, the company chaired by Magdalena Martullo-Blocher, a member of the House of Representatives for the right-wing Swiss People’s Party. The company is not very talkative: it merely tells us that it has two small Russian subsidiaries with around 30 employees each and that “business has collapsed”.

More substantial is the activity of Swiss Krono, world leader in the production of wood-based materials. The company, which employs around 1,000 people in the town of Sharya, where construction of a new production line began in 2021, chose to keep the plant open. “With the outbreak of war, we stopped all exports of our products to Russia and Belarus. However, after careful evaluation, we have come to the conclusion that we will continue to operate our plant in Russia for the time being,” the Lucerne-based company informed us.

Another company on the no-change list, Sika, did not respond to our requests for comment. The Baar-based group, active in construction and industrial chemicals, last year acquired a Russian company with production units in St Petersburg and Yekaterinburg.

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Essential goods?

The case that caused the most discussion was that of Nestlé. At the end of March Ukrainian President Volodymyr Zelensky was present at a demonstration in Bern, where he pointed the finger at the food giant based in Vevey and still operating in Russia. “Business in Russia works even if our children are dying and our cities are being destroyed,” Zelensky exclaimed via video.


This was followed by a call from Actares, a shareholders’ organisation that represents Swiss companies, to take into account not only economic criteria when doing business, but also criteria such as human rights and compliance with environmental standards.

The multinational says it has downsized its presence in Russia, discontinuing, for example, the KitKat and Nesquik brands. Nestlé employs more than 7,000 people in Russia and has six factories that generate about CHF1.7 billion in sales, less than 2% of its global total. A spokesperson explains that the company’s “activities are focused on providing essential foods and not on making profits”.

A Nestle plant in Perm, in the Ural mountains. Since the outbreak of war, the Swiss multinational has suspended production and sales of KitKat and Nesquik in Russia. Keystone / Sergei Rusanov

“Nestlé – it took them a while to agree to downsize and reduce to just baby food and hospital nutrition. They got the message that items like KitKat and Nesquik don’t really qualify as essential foods,” Sonnenfeld said.

He then points the finger at Zurich-based confectionery group Barry Callebaut, which makes roughly 5% of its turnover in Russia and employs about 500 people in three factories, one of which, in Kaliningrad, opened less than a year ago. Barry Callebaut has suspended investments, but in response to our questions confirmed that it continues to produce. “We want to be there for our employees and our clients, who provide essential food for the population. We continue to provide food for the Russian population, and chocolate is part of the daily diet of many.”

What is essential is a relative concept. What is certain is that the argument is also used by the pharmaceutical industry. “Our colleagues in Russia play a vital role in ensuring that patients in Russia continue to have access to the essential, life-saving drugs and diagnostics they need. This is why we maintain our operations in Russia which focus on delivering our products to patients,” explains a spokesperson for Roche, a group that has no production facilities but employs 810 people in Russia.

Novartis makes a similar point. “Our commitment is to ensure access to medicines for patients in all the countries where we operate,” explains the company, which employs 2,000 people and has a plant in St Petersburg, where it announced investment of $500 million (CHF484 million) in 2010. The two pharmaceutical giants have stated that they have halted investment.

The great dilemma

Of course, there are also those companies which have announced they are leaving the Russian market for good.

One example is Holcim, which controls three cement plants and employs about 1,000 people. “Holcim has decided to start the process of exiting the Russian market in line with the company’s values of operating in the most responsible manner,” reads a statement. However, the cement giant also recently left India, so it is possible that a new global repositioning strategy is behind the decision to leave Russia.

The latest farewell announcements have come from insurance group Zurich and bank Julius Bär.

The fact is that the transition to leave Russia is not easy. “It’s very difficult to make strategic decisions as to what we can do right now,” Frank Rust, group treasurer at Bucher Industries, an engineering group from Zurich, explained to the pressExternal link at the start of the war. “We built up our production sites in Russia five years ago, and we cannot do that much to change the situation now. At the very most we can only shut them down if Western world tensions increase with Russia.” Rust now tells SWI that the group “has substantially reduced business activities in Russia”.

ABB, which has invested heavily in Russia in recent years, employs 750 people and generates 1-2% of its turnover there. The company has chosen to take a step back, which involves taking various factors into account. “After a careful case-by-case assessment, we will have to fulfil a small number of existing contractual obligations with customers, without violating the imposed sanctions,” a spokesperson explains.

In short, it’s one thing to say “we’re leaving”, it’s another to face real-life difficulties. “For many companies, staying in Russia entails a big risk to image and reputational damage. But the choice is not so clear-cut. Think of the money and time invested to gain market share in Russia,” says lawyer Dimitri Lavrov, a partner at NexLaw in Geneva.

Lavrov is familiar with the Russian commodities trading sector and its legislation. He says Russia has drafted a law that aims to put foreign companies leaving the country under state administration and then sell these companies and their assets to the highest bidder if they do not return or refuse to be put under administration.

The law is not yet in force, but as Lavrov points out, “the legislative process in Russia can be very quick if the political will is there”. Fear of this type of confiscation has led several companies to make a hybrid choice, he says. “On the one hand, for image reasons they have announced that they are leaving Russia, but on the other hand they continue to pay their staff, taxes, rent and social security contributions so as not to be expropriated and lose market shares into which companies from countries considered friendly by Russia, such as India or China, could penetrate.”

Official reaction

For their part, the Swiss authorities say they are in contact with the companies and are monitoring the situation.

“The State Secretariat for Economic Affairs (SECO) and the Swiss embassy in Russia are closely coordinating their efforts to protect the interests of Swiss companies in Russia,” said SECO spokesperson Livia Willi. “With regard to the numerous uncertainties and regulatory measures resulting from the current difficult situation, the embassy and SECO are in close contact with companies in Russia.”

Since February there have been some 60 contacts with affected companies, including those wondering whether they would stay in the market. The decision, however, is not up to the authorities. “The administration can offer support to put political and economic events in perspective, but it does not give advice on whether to stay in the market. It is a business decision that companies make on their own,” Willi said.

For Dmitri Lavrov, a crucial role is now being played by the banks. “Financial institutions are very much afraid of the US’s role of global cop, thanks to the use of the dollar as the world’s main currency,” he said.

In the past, several banking institutions like BNP Paribas have been sanctioned for financing commercial or other activities related to US-sanctioned countries. Today, the banks even go beyond the legal requirements and no longer finance any activities with Russia.

For Lavrov, this situation puts many Swiss companies in difficulty. “If they are active in Russia, they risk having problems with the banks, which fear US retaliation. For this reason, beyond the surface declarations many companies have decided to at least “freeze their activities in Russia”. In short, the dilemma of what to do remains.

In April 2017 Glencore’s then CEO Ivan Glasenberg was awarded the Order of Friendship, an important Russian honour, by Vladimir Putin. The investiture came shortly after Glencore acquired a stake in state giant Rosneft, which at the time was in a liquidity crisis partly due to sanctions imposed after the invasion of Crimea. By joining forces with the Qatari sovereign wealth fund, the Zug-based giant acquired a stake in Rosneft, thus securing important access to oil production. The majority of the share has since been sold.

After Russia’s invasion of Ukraine, Glencore came under intense pressure for its operations in Russia. On March 28, the chief economic advisor to Ukrainian President Volodymyr Zelensky wrote to the company’s CEO, Gary Nagle, saying that “the Ukrainian government is upset that your company continues to trade Russian oil and to export fossil fuels from Russia”. Two days later, Glencore issued a statement saying that it “will not undertake any new trading activities in relation to Russian-origin raw materials”. The company did, however, reiterate “that it will continue to honour its legal obligations under pre-existing contracts, provided it complies with all applicable sanctions in accordance with our sanctions policy and where it is possible and safe to execute such contracts”.

The company based in Baar in canton Zug still holds a 10.55% stake in En+ Group, an aluminium production group whose largest shareholder is Oleg Deripaska, an oligarch also under sanction in Switzerland, and a 0.57% investment in Rosneft. For Glencore “there is no realistic way to exit these holdings in the current environment”. 

Trafigura, a global trader active from Geneva, had also previously helped finance Rosneft, which was suffering from a high level of debt due to its expansion. In 2013 Trafigura proposed a financial advance of $1.5 billion repayable in the short term on future barrel supplies. Trafigura has also entered the Vostok Oil project in the Arctic, which it is currently considering. “We are continuing to review the options related to our passive participation in Vostok Oil, in which we have no operational or managerial input,” a spokesperson explained. Trafigura, as well as Vitol, have announced that they will stop buying Russian oil as of this May. As revealed by NGO Public Eye, Swiss companies were the most active in the purchase of Russian oil in the first months of the conflict. The justification: existing contracts to be fulfilled. Today a change, at least on paper, has been announced. But behind the vaunted ethical motives there may be a more practical reason: banks have in fact stopped financing Russian commodities transactions.

Edited by Virginie Mangin, adapted by Thomas Stephens

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