End of an era in Russia when sanctions bite and Western companies take flight

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End of an era in Russia when sanctions bite and Western companies take flight

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The Iron Curtain, which had divided Eastern and Western Europe for decades, had just collapsed. Now the fast food chain loved by Americans and many others could serve Big Mac to Russian customers.

Of course, Russians can choose to eat elsewhere and buy other goods – many homegrown chains have sprung up across the vast country since the end of the Soviet Union.

“Coca Cola, Pepsi, McDonald’s were the symbols of Russia’s westernization, of Russia’s opening up to the world. And the fact that these companies are leaving … signals and highlights the extent to which Russia is closing down and it is turning inward, “said Gulnaz Sharafutdinova, professor of Russian politics at King’s College London’s Russia Institute.
Russians wait in line outside a McDonald's fast food restaurant in Moscow in 1990.

That first McDonald’s in Pushkin Square, known to Russians as Pushkinskaya Square, housed 700 diners and was the company’s largest store in the world for years. Young middle-class Russians, who grew up in the 1990s, saw McDonald’s as a cool and tempting foreign place, a restaurant where you took friends to celebrate special birthdays.

As the 21st century progressed, the chain seemed a less powerful symbol of American culture, but it has remained a favorite gathering place for Russian college students to meet for affordable lunches or dates and offered a quick dining option. and economical for others. Its branches have also offered job opportunities to tens of thousands of Russians.

All of that is gone now, at least for the foreseeable future. “Our values ​​mean that we cannot ignore the unnecessary human suffering that is occurring in Ukraine,” McDonald’s chief executive Chris Kempczinski said in a message to staff on Tuesday announcing the suspension of the company’s operations in the country. He added that it was “impossible to predict” when his restaurants might reopen. CNN has contacted McDonald’s to confirm the final closing date of its restaurants, but has not yet received a response.

“Whether it is the end of an era or not is hard to say right now, many observers fear it could be, and that will depend on how long it takes Russia to go through the difficult, dark, toxic authoritarianism – slash-totalitarian dictatorial period. “Sharafutdinova said over the phone. “We are also quite clear that moving away from this will require a lot of effort: social, political, economic and leadership.”

A soldier delivers two cans of Coca-Cola to a tanker near the Russian Federation building in Moscow on August 21, 1991.

Reputational injury

Many ordinary Russians are still reeling from the shock of the events of the past two weeks. With news coverage of the war tightly controlled by the state, it is difficult to take stock of exactly how much their world has changed with the imposition of Western sanctions.

But the economic pain is already being felt when the value of the ruble collapses and bank controls tighten. While some wealthy Russians rushed to sell goods overseas and even leave the country as long as they could, the less well off have fewer options.
Shoppers walk past the closed H&M store in the Las Vegas Mall on March 4, 2022 in the Russian capital.

The most immediate impact will obviously be on those working for Western companies who have suspended their operations, although there have been promises of continued support from their employers.

In his statement, Kempczinski said the 62,000 employees in Russia “who poured their hearts and souls into our McDonald’s brand to serve their communities” will continue to get paid. He also noted the impact on “hundreds of local Russian suppliers and partners who produce the food for our menu and support our brand”.

Swedish furniture giant IKEA, which first opened its doors on Russian soil in 2000 and now has 17 stores across the country, said its decision to suspend all inbound and outbound exports and imports from Russia and Belarus and to stop all IKEA operations in Russia, impacting directly on 15,000 workers.

“The ambitions of the corporate groups are long-term and we have ensured employment and income stability for the immediate future and provided support for them and their families in the region,” IKEA said in a statement.

Shoppers wait in line to pay for their purchases at the IKEA store on March 3, 2022 in Moscow.

For other Russians, the impact, although less direct, is likely to be demoralizing on two levels, said Tomas Chamorro-Premuzic, a professor of business psychology at University College London. First, they will lose access to the products and services they enjoy, but also, and perhaps more painfully, they will feel the reputational hurt of being “ostracized from the world and vilified,” he said via email.

Of course, the response between different sectors of Russian society will vary, Sharafutdinova points out. Some of the companies that suspend their activities in Russia are luxury brands whose products would have been out of reach for the vast majority of Russians.

But others, like IKEA, or Starbucks, or even McDonald’s, “were places visited, used and consumed regularly by the Russian middle class” in urban areas, he said, and their loss will affect large numbers of people. “There will be substitutions, but it is yet another symbol of the middle class for the Russians and they will lose that access,” she said.

Outside of those urban areas, where views are more cosmopolitan, the reaction is more likely to be defiant in the face of sanctions, Sharafutdinova added, with the West seen as turning against Russia.

Those Russians “would consider themselves some kind of Russian patriots who care about Russia’s national interests, because that’s how the government presents it … they’ll be defiantly and consolidate behind the leadership and say, ‘Okay, you better we will build our economy, ‘”he said.

Russian President Vladimir Putin on Friday insisted that Western sanctions represented an opportunity for Russia’s $ 1.5 trillion economy, the 11th largest in the world.

“The last few years have shown that where Westerners have imposed restrictions on us, we have acquired new skills and restored old ones to a new technological level,” Putin said, speaking in Moscow with Belarusian leader Alexander Lukashenko.

“This is a time of opportunity to move towards strengthening technological and economic sovereignty,” Putin added.

People are seen in a McDonald's restaurant in Moscow on March 9, 2022.

Job losses

Some in Russia are responding to the withdrawal of Western brands with dark humor. New memes are making the rounds on social media, such as one suggesting that IKEA’s giant plush sharks, for which there was previously a craze in Russia, should have been stockpiled, or indicating that McDonald’s food is now sold on Avito, an equivalent Russian from eBay or Craig’s List.
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A Twitter user published a photo of people lining up outside Pushkin Square McDonald’s in 1990 with the ironic caption (in Russian): “Moscow, McDonald’s restaurant opening, March 2025”.

However, the symbolism of the world’s withdrawal from Russia will have an emotional and psychological impact, Chamorro-Premuzic said.

“It’s not really about the functional loss of paying more for furniture or not having your favorite burger or coffee, but the fact that you have become public enemy number one. With any bad leader or despotic ruler, they are the citizens of country to suffer the most. “

Job losses could also occur if companies decide to permanently close operations, rather than suspend them, Chamorro-Premuzic added. “These are big employers and just as they created many jobs when they arrived, the jobs will go if they go,” she said.

But that doesn’t mean those companies will say goodbye to Russia forever. Companies could, of course, “come back very easily if there are significant political changes, changes of government, changes in reputation,” Chamorro-Premuzic said.

“Of course it’s a big market for companies, so they will have the same incentive to go back as they should have gone the first time. So if there are no moral or reputational impediments to the brand, they will come back.”

Meanwhile, according to Putin, Russia and Belarus will overcome the difficulties presented by the sanctions and even “acquire more skills, more opportunities to feel independent, self-sufficient and, ultimately, take advantage of them. [from them]as it happened in previous years “.

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