Russia is excited about the potential return of Western brands to its market, but is this justified? Given that Western brands are undoubtedly aware that, since the beginning of the war, businesses in Russia have been overtly nationalized. Igor Lipsitz shared his thoughts on this.
“Well, look, first of all, none of the major brands have announced their return; there are only discussions, and you can discuss something for a long time without consequences.
What does the return of a brand mean? It’s one thing when a company supplies cosmetics, clothing, etc., to Russia. These are still present on the Russian market. They are brought in by former employees of the companies, but through different channels. It seems like the company hasn’t left the market, and reopening services won’t be too hard.
But another thing is that many brands built factories in Russia. I warned them that this was dangerous. But it’s not always easy to convince someone that building a factory in Russia is risky. Companies, often dazzled by the sales volume in Russia, would make the decision to quickly build a factory. Now, those factories have been taken away from them. In colloquial Russian, they’ve been ‘squeezed out.’ There was also a government requirement that if you wanted to sell your assets built in Russia, you could only sell them for half their market value. They were punished for trying to leave Russia. So, of course, those who built factories have lost a lot and suffered greatly.
In general, I don’t believe that they will easily forget all this and return. It’s a very strange hypothesis. I doubt it. Let me remind you of something. Western brands and companies have already come to Russia once before. Only back then, the country was called the Soviet Union. There was a mechanism called a concession. Western companies would take a concession to develop deposits, for example. They would extract and mine resources for the Soviet economy. The USSR really needed these resources because they didn’t have the necessary qualifications.
Then, everything was confiscated, and Western companies had a long negative experience working with the USSR. It took about 30-40 years for companies to return. The first ones came, and even then, there wasn’t a single foreign-owned factory. But at least some products began to return.
This is exactly the same situation now. It’s going to be a long-lasting negative experience, a horrible memory of being robbed and leaving Russia, with assets ripped away. That’s exactly what will happen. So, I think some products might appear, but I doubt big companies will confidently come back and build factories.
And when you discuss the happy return of brands to Russia, I suggest you look at another side. Since 2014, Russia has been running an import substitution program. Russian businesses were convinced: ‘Guys, we will push all foreigners out, clear the market for you, and you’ll build and sell, and be happy forever.’ Now, people have built factories, and they are told, ‘Well, we’ve decided to bring Western brands back, and you can go wherever you want.’ And Western companies will come and push them out of the market. It’s a strange story!
That’s what I’m saying: in Russia, you can never trust the government in anything, yet people still try to, and then they get hurt.”
