These U.S. Corporations Are Probably Scared of Sanctions on Russia

by Danny Vinik | March 4, 2014

Reports that economic sanctions against Russia "are likely to be imposed within days" must be making a number of American CEOs very nervous, as such a move could cut off companies from a major, growing market. Here’s a rundown on some of the biggest U.S. companies that could be impacted:

PepsiCo Company

Pepsi had nearly $5 billion in net revenue in Russia in 2012, accounding for 7.42 percent of their total net revenue, and the country also represents one of Pepsi’s fastest-growing markets. The company has been buying up Russian firms, including a $5.4 billion acquisition of the leading dairy producer in 2010.

Coca Cola Company

Coke does not disclose its net revenues in Russia, but still has a large presence there. In 2011, it reported 3 percent growth in beverage volumes in the country. In 2011, it partnered with a global bottler, Coca-Cola Hellenic, in which it owns a 23 percent stake, to invest $5 billion in Russia through 2016.

Exxon Mobil

Exxon’s annual report contained limited information about its activity in Russia, but the oil giant signed an agreement in 2011 with Russian state-run oil company Rosneft to drill in the Arctic. The firms were supposed to begin drilling their first well this year. The lucrative crude up there could be worth hundreds of billions of dollars. From 2000 to 2011, Exxon also invested $10 billion in its Russian operations.

General Motors

GM sold 258,000 vehicles in Russia last year, for a market share of more than 9 percent. That’s slightly down from its 288,000 in sales in 2012 and accounts for less than 3 percent of their vehicle sales worldwide. GM also has production facilities in Russia and announced a five-year, $1 billion investment there in 2012.

Ford

Ford has less of a presence in Russia than GM does, having sold 105,000 vehicles there in 2013 for a reported market share of 3.8 percent. Ford also has manufacturing facilities in Russia. Like GM, Ford had been looking to increase its investment in Russia and invested $1.4 billion in a partnership with the Russian Sollis in 2011.

The U.S. Chamber of Commerce estimated that U.S. exports of goods and services to Russia in 2011 was more than $10 billion. That’s not much compared to the $2.1 trillion in total exports that American companies did that year. Nevertheless, Russia is an emerging market with growing incomes, and U.S. companies have been actively looking to increase their investment there in recent years. Companies like Pepsi, Coke, and Ford will be reluctant to support any economic sanctions that dig into their bottom line, especially if the European Union refuses to implement their own sanctions. Since the U.S. and Russia do very little business together (only $30 billion in 2013), any unilateral sanctions from the U.S. will only have a marginal economic effect, although they may offer symbolic value as well. 

Source URL: http://www.newrepublic.com//article/116853/economic-sanctions-would-hurt-american-companies-russia