Sensemaker: Moscow mules

Long stories short

• Lviv came under Russian missile attack for the first time since the invasion, when rockets hit a maintenance building near its airport.
• Unions condemned Dubai-owned P&O Ferries’ sacking of 800 workers as one of the “most shameful acts in the history of British industrial relations”.
• Veronika Belotserkovskaya, a Russian celebrity chef, was accused of spreading false information after telling her 900,000 Instagram followers Putin was making “mincemeat” of Russian soldiers. 

Moscow mules

Household names from the FTSE 100 with a combined market value of at least £780 billion are continuing to conduct business with Russia three weeks into the war.

BT, AstraZeneca, Relx and Unilever are among those maintaining operations in Russia despite sanctions designed to isolate the Russian economy and bring the fastest-possible end to the fighting. Only 13 companies on the index explicitly condemned Russia’s actions.

Twenty-three other FTSE names including HSBC, Coca Cola HBC and Burberry – nearly a quarter of the index – failed to respond at all to repeated requests for comment. They were approached as part of a comprehensive Tortoise survey of Britain’s biggest businesses’ response to the Russian invasion.

Companies with no plans to pull out include:

• Relx, an academic publisher, which has “around 100 people” in Russia but did not set out any plans to withdraw from the country;
• Mondi, one of the world’s biggest paper and packaging companies, which employs 5,300 people in Russia including 4,700 in the city of Syktyvkar, where it runs a power station that provides heat and warm water for 60,000. Mondi says it’s “legally required by the Russian authorities to provide the energy supply”;
• Smith & Nephew, the medical technology company, which says it will continue to provide products in Russia in order to meet patients’ “essential medical needs” (AstraZeneca similarly says it is continuing to provide “life-saving” medicines to customers in Russia who rely on them);
• the Royal Mail, which says it has an obligation to deliver mail to Russia as part of its agreement with the Universal Postal Union, a specialised UN agency that coordinates postal policies among member nations;
• commodities giant Glencore, which has yet to announce an exit strategy from its equity stakes in Russian energy companies En+ and Rosneft, saying it is “reviewing” all business activities in the country;
• Pershing Square Holdings, with stakes in Starbucks and Hilton hotels, which explicitly refused to comment or disclose any changes to its business.

Diageo’s Russian office was open when we phoned yesterday, although it has suspended distribution of its products. Unilever is continuing to provide “essential goods” to Russian customers. BT has stopped sales of new products and services but has not set out a plan to withdraw existing ones or cut short contracts.

Giles Gibbons, CEO and Founder of Good Business, says pressure from companies is essential to shortening the war. Many businesses are doing the “obvious and easy thing” by giving to charity, he says, but “the fundamental responsibility of an organisation is how it does its business, not who it gives money to”.

We approached every member of the FTSE 100 with a list of questions on their response to the invasion, including whether they have offices, investments or operations in Russia; whether they plan to stop taking on new Russian business; and whether they support efforts to prosecute the invasion of Ukraine as a war crime at the ICC.

Of the 77 companies that responded, 44 had offices or other business in Russia such as supplier or sales relationships. Of those, 31 said they were pulling out of the country in some way, but 20 said they would continue to hold a presence in Russia or hadn’t yet taken action. 

Withdrawal plans vary widely on points of detail: 

• The drinks giant Diageo released a statement saying it has “paused” exports to Russia. 
• Unilever and Reckitt, consumer goods companies, have paused some of their sales and advertising in Russia, but continue to provide “essential goods” in the country. Unilever says it will not “profit from our presence in Russia”.
• InterContinental Hotels Group has suspended future investments in Russia, but maintained existing franchise agreements with the companies that own its hotels in Russia.

Others have taken a hardline approach. BP announced plans to sell a £25 billion stake in the Russian oil giant Rosneft, saying “military action represents a fundamental change” for the business, and the relationship “simply cannot continue”. The move will have a significant impact on BP’s bottom line; Rosneft delivered a fifth of the company’s total profits last year. Fellow oil giant Shell and British American Tobacco were among the companies with similarly hard exits. 

The language used by FTSE 100 companies is revealing. Many expressed sadness, shock or concern for those in Ukraine, but most fell short of criticising the invasion. Sixteen said a primary concern was the welfare of their employees – often referring to Russian employees as well as those in Ukraine. Twenty said they would be donating in some way.

Analysts see two schools of thought in the corporate response. One of them says ordinary Russians aren’t to blame for Putin’s recklessness, and nothing businesses say about it will influence his behaviour. 

“On the other hand,” Gibbons says, “if we don’t use all the tools we have to make the Russian population aware of what their leader is doing, then nothing’s going to change”. 

Evraz and Polymetal, two UK-listed companies that operate mainly in Russia, have seen sanctions crippled their operations and board members quit in droves. Both have been barred from the FTSE as of next week; neither responded to requests for comment.

This story has been amended to clarify that Diageo has suspended distribution of its products in Russia.

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CAPITAL ECONOMY, BUSINESS AND FINANCE

Say it ain’t so P&O
There are two ways of looking at P&O Ferries’ extraordinary and unexpected decision to sack virtually its entire staff and replace them with others hired by an agency. One is that its business model is failing – it claims to have lost £100 million last year – and it thinks it can save money with new people. The other is that its owner’s principal investor, Sheikh Mohammed bin Rashid al-Maktoum, has developed a grudge against the UK after the High Court ordered him last year to pay his estranged wife £550 million for her family’s security and maintenance. The Sheikh is the ruler of Dubai. Princess Haya Bint Al-Hussain, the youngest of his six wives, fled the city for London in 2019 saying she feared for her life. This much is clear: the lives of 800 P&O staff were turned upside down yesterday by a four-minute video message many of them did not even see. The shadow transport secretary said it was beneath contempt. It may also be an act of corporate self-harm because neither staff, unions or government seem to have been consulted. Employment lawyers are circling.

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CULTURE soCIETY, IDENTITY AND BELONGING

Electoral mobility
Mark Meadows, Donald Trump’s former chief of staff, is under investigation in North Carolina for suspected voter fraud. The investigation began after allegations raised by the New Yorker that Meadows’ registration seemed suspect: he listed his legal residence as a mobile home he rented for several months but appeared never to have visited. Lying on a voter registration form is a felony that Meadows tried to use to change the course of history – he was among the chief architects of Donald Trump’s attempt to overturn the results of the 2020 election, and claims of “widespread voter fraud” were a central strategy of the campaign. 

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TECHNOLOGY AI, SCIENCE AND NEW THINGS

German F-35s
As soon as Germany said it would be spending an extra €100 billion on defence, the question arose what that might buy. One answer seems to be a few F-35s, or even a few squadrons. At a unit cost of around $78 million excluding service contracts that will entail sharp intakes of breath in the Bundestag and German finance ministry, but economies of scale mean F-35s are now actually cheaper than some European alternatives like the Typhoon and France’s Rafale F4.2. And the geopolitical significance of buying American is hard to overstate. Nothing evokes Cold War atlanticism more than US fighters on German runways, except perhaps US nukes on British submarines. And those Lockheed service contracts – which are mighty expensive and completely essential because F-35s are so temperamental – have been described as America’s answer to China’s Belt and Road Initiative. These are ties that bind.

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The 100-year life health, education AND GOVERNMENT

Title 42 
As most eyes are trained on the refugee crisis on Ukraine’s borders, the Biden administration is preparing for a mass migration event on the US-Mexico border as Covid measures which have stopped over a million asylum seekers crossing are due to end. Axios has the scoop on the formation of a Southwest Border Coordination Center – an interagency “war room” that will manage the 170,000 people expected to attempt to enter the US. Title 42, WW2-era provision of federal immigration law, was invoked by Donald Trump at the start of the pandemic to force migrants back into Mexico without considering their asylum applications, to prevent infection spreading. Biden has a fine line to tread between placating Democrats who have called the use of Title 42 cruel, and overwhelming already stretched resources on the border. 

Our planet CLIMATE AND geopolitics

The Goldberg variation
The Guardian has a must-read long read by Chris McGreal on Phil Goldberg, a US lawyer who runs a pressure group called the Manufacturers’ Accountability Project (Map). Map has little to do with manufacturing and a lot to do with undermining environmentalists’ lawsuits against Big Oil. Such suits have spiralled in number in the past 10 years and collectively aim to deliver the kind of punch to the fossil fuel sector that class action lawyers delivered to Big Tobacco in the 1990s. Most are based on the argument that Big Oil knew its products caused global warming but for decades deliberately muddied the science. Goldberg says climate litigation has no legal foundation and isn’t the way to fight climate change anyway. Probably best to follow the money, as McGreal does. Much of Map’s comes from fossil fuel interests. But he is exploiting a difference between tobacco and oil that climate litigants are going to have to deal with: the world is dependent on oil in a way that it never was on cigarettes.

Thanks for reading and do share this around.

Patricia Clarke
@paticlarke

Kim Darrah
@Kimgidarrah

Katie Riley
@KatherineERiley

Additional reporting by Barney Macintyre, Ellen Halliday, Luke Gbedemah

Photographs Andrea Carrubba/Anadolu Agency, Adel Senna/AFP, Christopher Furlong/Getty Images, Brandon Bell/Getty Images

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Sensemaker: Invaded: A family reunited