The Ukrainian President Volodymyr Zelenskyj used his virtual tour of the parliaments of the USA, Great Britain and Germany in the past few weeks to promote more arms deliveries and support in view of the Russian invasion of his country. However, during his video link in front of the French parliament last Wednesday, he specifically targeted the French economy.
“French companies should leave Russia,” demanded the 44-year-old, as usual in a khaki T-shirt with the yellow and blue Ukrainian flag in the background. “[Autobauer] Renault, [Supermarktkette] Auchan and [Baumarktkette] Leroy Merlin must stop being the sponsors of the Russian war machine – values are more important than profits.” Then he called for a worldwide boycott of Renault. The carmaker then announced in the evening that it would stop activities at its only plant in Russia The company wants to “reconsider” its 68 percent stake in the Russian manufacturer Avtovaz – the maker of the traditional Lada brand.The closure of plants in Russia is not an easy decision – and could even be counterproductive for the West, say not only the companies himself, but also French economists.
Production line at the Renault car plant in Moscow
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French companies are Russia’s largest foreign employer
“We have been monitoring the situation since the beginning of the invasion, but now it was simply no longer justifiable to keep our business there unchanged – also because the war will probably drag on for a long time,” a spokesman for Renault told DW. This decision has far-reaching consequences: the group of companies, 15 percent of which is owned by the French state, has lowered its profit forecast for this year from four to three percent. And the fate of the company’s 45,000 employees on site is now uncertain – although Renault will initially continue to pay their wages.
Many French companies operating in Russia will have to consider the human factor in their decision to go or not to go. According to France’s Ministry of Economic Affairs, French companies are the largest foreign employer there: with 500 branches in sectors such as energy, wholesale and the food industry and a total of 160,000 employees. “French companies are often active in the job-intensive service sector – unlike German or Italian ones,” Julien Vercueil, an economist specializing in Russia and vice president of the National Institute for Oriental Languages and Civilizations in Paris, told DW.
Workers in a factory of the Russian car manufacturer Avtovaz in Togliatti (Russia), which is majority owned by Renault.
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Expropriation would benefit Russia
So too Leroy Merlin with around 100 stores and around 45,000 employees in Russia. Because the company has maintained these activities so far, it has not only received sharp criticism from Zelenskyj: demonstrations have taken place in France and Poland. Even the company’s own employees in Ukraine called for the immediate withdrawal of the company from Russia in an online petition after eight people were killed in a bomb attack on a branch in the capital Kyiv. But the parent company Adéo replies in a press release: “We have a responsibility to our employees and their families.” Closing the Russian shops would even be counterproductive, they say: “It would be the inevitable bankruptcy that would lead to expropriation, which would be good for Russia’s finances.”
Protests against Leroy Merlin in front of a branch in Gdansk (Poland)
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Withdrawal would be “an immense gift for the oligarchs”
The energy company TotalEnergies argues similarly – not mentioned in Zelenskyj’s speech, but also active in Russia. “If we left the country, it would be an immense gift for the oligarchs,” the company told DW. TotalEnergies will no longer purchase oil from Russia from the end of 2022. But Russian gas wants to continue buying it for lack of alternatives. At 17 percent, this accounts for the largest part of TotalEnergies’ worldwide gas purchases. The energy giant also wants to keep its $13 billion stakes in about half a dozen Russian companies. Even if he will not make any additional investments.
Logo of the French oil and gas company TotalEnergies
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Yannick Jadot, the Green Party candidate in the upcoming presidential elections in a few weeks, has denounced this position. He accused TotalEnergies of “being an accomplice to Putin and his bombing of civilians”. Words that made the group’s managing director, Patrick Pouyanné, jump out of his skin in an interview with the French radio station RTL: “I’m an angry boss,” he said. Jadot’s claims are “extremely serious” and “an insult”. The group has now sued the Green politician for defamation.
So far, European companies have not been obliged to leave the Russian market as a result of the sanctions passed by the international community. And the French government does not want to directly intervene in their decisions. “I have instructed companies operating in sectors where sanctions are in place to comply with what France decides. But my position is to let companies decide for themselves [ob sie weiter in Russland tätig sind]”said French President Emmanuel Macron recently at the NATO and G7 meeting in Brussels.
The supermarket chain Auchan has also kept its branches open in Russia (here in Moscow).
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The price of European values
Russia specialist Vercueil understands that the issue is sensitive. “If companies that employ a lot of people locally pull out of Russia, there is a risk that Russian President Vladimir Putin will use this for his propaganda and say: ‘Look, they want to punish you – the West is anti-Russian,'” he says . That could then even weld the population together with Putin.
Edouard Simon, research director for security and European defense at the Paris Institute for International and Strategic Relations, adds that European and international allies must carefully weigh the effectiveness of sanctions. “It’s a fine line,” he told DW. “The sanctions must hurt Russia more than Europe and France.” That’s why an energy embargo, for example, is such a difficult question. “It would have far-reaching economic consequences in Europe. And governments, especially the French one, want to prevent that during the presidential election campaign,” adds Simon.
But Olivier Marty, a lecturer in European economics at Sciences Po in Paris, believes the West must be willing to pay the price. He refers to a package of compensatory measures that the French government recently decided on. These include subsidies for energy purchases and short-time work. “If need be, other European countries must also take such measures,” he said in an interview with DW. “After all, it’s about defending European values.”
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