Russian prosecutors have issued warnings to Western companies in Russia, threatening to arrest business leaders there who criticize the government or seize the assets of companies that pull out of the country, according to people familiar with the matter.
Prosecutors issued the warnings last week to companies such as McDonald’s Corp.
MCD 2.19%
International Business Machines Corp.
IBM -0.31%
and KFC owner Yum Brands Inc.,
YUM 0.38%
people said. The calls and visits included threats to sue the businesses and seize assets, including trademarks, the sources said.
Russian President Vladimir Putin last week expressed support for a law to nationalize the assets of foreign companies that leave his country because of the war in Ukraine. Prosecutors’ warnings targeted companies across all industries, including tech, food, apparel and banking, people familiar with the matter said.
The warnings prompted at least one of the targeted companies to limit communications between its Russian operations and the rest of the company, fearing emails or text messages between colleagues could be intercepted, one of the people said. Other companies have decided to transfer executives out of Russia, another person said.
Spokespersons for IBM and McDonald’s declined to comment. A spokeswoman for Yum declined to comment beyond the restaurant company’s past statements about its decision to suspend operations at its KFC and Pizza Hut restaurants in Russia.
KFC operating in a Russian mall on Saturday.
Photo:
Maksim Konstantinov/Zuma Press
The Russian Embassy in Washington did not immediately respond to a request for comment on Sunday.
A parade of companies announced plans to suspend or scale back operations in Russia following the Russian invasion of Ukraine and sanctions imposed by Western governments.
Many companies, especially retailers and manufacturers, said their decisions to shut down operations were temporary. Some said they were necessitated by the disruption the sanctions have had on supply chains. Others have pledged to leave for good.
Russia’s attorney general’s office said on Friday it would ensure that companies that said they were suspending or exiting operations complied with the country’s labor laws. More than 300 foreign companies have said they are quitting or temporarily suspending operations in Russia, according to the Yale School of Management.
Wall Street banks like Goldman Sachs Group Inc.,
consumer goods companies like Coca-Cola Co., retailers like Levi Strauss & Co., and tech giants like Apple Inc.
announced their intention to withdraw. Energy giants such as BP PLC and Exxon Mobil Corp. said they would quit Russian operations.
Mr Putin has endorsed a plan launched last week by a senior official of his dominant United Russia party to nationalize the operations of Western companies leaving the country. Such a move would help prevent job losses and maintain Russia’s ability to produce goods domestically, said Andrei Turchak, secretary of the General Council of the United Russia party.
Washington has warned against a nationalization effort. “Any lawless move by Russia to seize the assets of these companies will ultimately cause even more economic suffering for Russia” and could result in legal action, White House press secretary Jen Psaki tweeted Thursday.
Last week, restaurant owner Yum said it was temporarily closing its 70 company-owned KFC locations and signing an agreement with its Pizza Hut franchisee to halt operations at its 50 locations. It was also suspending all investment and restaurant development in Russia, the company said.
The company “is focused on the safety of our employees in the region and will continue to support our teams in Ukraine while evaluating ways in which Yum Brands can have a positive impact in the region,” the spokeswoman said.
IBM Chairman and CEO Arvind Krishna wrote in a blog post last week that the company had suspended all operations in Russia. “The safety and security of IBMers and their families in all areas impacted by this crisis remains our top priority,” he wrote.
McDonald’s announced last week that it was temporarily closing its approximately 850 restaurants in the country and would continue to pay the 62,000 people it employs in Russia. The company said it could not yet determine when it could reopen restaurants in Russia and would consider whether additional measures might be needed. Closing restaurants is expected to cost the company about $50 million a month for payroll, leases, supply chain and other costs, McDonald’s said.
Write to Jennifer Maloney at [email protected], Emily Glazer at [email protected] and Heather Haddon at [email protected]
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