The return

While few analysts are predicting a mass return of Western businesses to heavily-sanctioned Russia in the coming months, the possibility of a wider re-engagement with the country cannot be ruled out if market leaders unilaterally opt to re-enter the Russian market.

After the gold rush

When top White House and Kremlin officials met in Riyadh last week to discuss a potential peace deal for Ukraine, they also discussed the possibility of sanctions relief, fuelling speculation that Western companies could soon resume their operations in Russia.

In the days following the sit-down, Vladimir Putin ordered his cabinet to prepare for Western re-engagement, and officials began holding unusually lively public debates about the merits of such a return. Kirill Dmitriev, the head of Russia’s sovereign wealth fund and a member of the Russian delegation to Riyadh, even said that he anticipated a number of US companies returning to Russia as early as the second quarter of 2025.

However, Russian negotiations with Western companies were first resumed earlier in February, around the same time that Donald Trump announced that he’d agreed to begin negotiations with Russia to end the war in Ukraine.

On 11 February, Zulfiya Shilyaeva, the head of Russian real estate brokerage Commonwealth Partnership’s retail department, said that she had been approached by “several international brands to explore the possibility of returning to the Russian market either directly or through the help of franchise partners.”

The same day, speaking with state-owned news agency TASS, Pavel Lyulin, vice-president of Russia’s Union of Shopping Centers, also said that foreign companies were “testing the water”, and that negotiations were “being conducted in private, unofficially”.

Three days later, pro-Kremlin Telegram channel Mash reported that international brands including Zara, Bershka, Pull&Bear, Stradivarius were preparing to return to the Russian market.

Then, on 17 February, the head of the State Duma Committee on Financial Markets Anatoly Aksakov, claimed that international payment systems Visa and Mastercard may soon resume their activities in Russia. However, when contacted by Novaya Gazeta Europe, Visa said that its position remained unchanged: “In March 2022, we announced the suspension of our operations in Russia and that suspension remains in place today.”

Reality check

Notwithstanding a thaw in relations with the West and a collective easing of sanctions on Russia, it remains to be seen how much of a business argument there is for Western brands returning to the country in the immediate future.

Speaking to Novaya Gazeta Europe, economist Sergey Zakharov* questioned the euphoric reaction of the Russian financial markets to Donald Trump publicly announcing the start of direct talks between the US and Russia earlier this month. “The news about the return of foreign brands is essentially a kind of misinformation that currently has no real basis," Zakharov stressed, adding that “the real picture” actually spoke to the contrary.

The decision made by most Western companies to leave Russia had more to do with their own instincts than with pressure from sanctions, according to Zakharov, who added that most were simply unwilling to operate in a country waging war on its neighbour and feared potential changes to Russian law regarding foreign ownership of businesses. That means that even if hostilities end, investor confidence is likely to remain low due to Russia’s continued unpredictability and high business recovery costs.

“At this stage, no major brand considers resuming operations in Russia to be a priority,” Zakharov said, adding that talk of Western companies returning to the country in 2025 were “more wishful thinking and less of a real scenario” and noting that businesses that have already experienced losses were “unlikely to want to risk re-entering a market that still has such high reputational and financial threats.”

Georgy Ostapkovich, Director of the Center for Short-Term Financial Research at Moscow’s prestigious Higher School of Economics, also said he believed that any eventual return of Western businesses to the Russian market would be a long, drawn-out process, telling pro-Kremlin news site Ridus that he thought the process would take between three and five years.

In any case, it’s far from certain that the recent US-Russia talks will result in the softening of Western sanctions on Moscow, let alone bring about a wider thaw in relations, given the lack of appetite shown by European countries for revising their approach to Russia.

Indeed, just a day after the Riyadh summit, the European Union approved a fresh package of sanctions targeting, among other things, Russian aluminium and crude oil exports.

Industry-specific analysis

Still, even in the absence of an all-out dash back to the Russian market, experts see a handful of companies potentially re-engaging more quickly than others.

While the figure of “some 350 brands” wishing to return to Russia that was recently cited by pro-Kremlin media may merely be “a general figure of the most famous companies that left the Russian market in 2022”, food brands like Coca-Cola, Pepsi or Nestle who “left only in words” could quickly resume work in Russia, according to a Telegram post by independent retail expert Michael Lachugin published last week.

“Those who did not go anywhere, but just carefully waited, creating the illusion of leaving, will return quickly. There are a lot of them,” he added.

Speaking to Novaya Gazeta Europe, Zakharov also noted that strategies could differ by industry and by country. Some manufacturers who have retained plants in Russia could theoretically return, for example, such as automakers and electrical companies.

According to Zakharov, European brands, particularly in the engineering, services, clothing and footwear sectors, were likely to start returning, though in a more fragmented fashion overall, with some countries such as the UK, France and Germany, attempting to discourage the process, while others, including Hungary, Italy and Austria, being more ready for rapid reintegration.

Retail expert Ivan Kuznetsov* said he believed that while the return of foreign fashion brands to Russia is quite realistic, “those who left will have to return on terms different to those they had before”.

“Perhaps it will be a compulsory partnership with someone who has Russian citizenship, not less than 51%, as, for example, in the UAE or other countries. Other options are possible to protect themselves from sudden withdrawal, as it has already happened,” Kuznetsov suggests.

Russia now ranks fifth in the world in terms of its proportion of purchases made online, with that level expected to reach 80% within the next five years, Kuznetsov notes. “Are Westerners ready for this? The market is no longer the same as it was before 2022.”

*All names have been changed