Companies find leaving Russia difficult, though many are trying

Philip Morris International Inc. is embroiled in the most complicated transaction in the company’s history, but the headache isn’t the recent $16 billion deal to buy rival Swedish Match. It is trying to get out of Russia. The process, begun in March shortly after Russia’s invasion of Ukraine, includes navigating Moscow’s shifting regulations, avoiding missteps that could prompt the government to seize the business and trying to protect employees from becoming targets for arrest. Philip Morris is trying to sell its Russian business and has had talks with suppliers interested in buying it. At the outset, it wasn’t clear which Russian authority would approve such a sale or what the process was for seeking that approval, Chief Executive Jacek Olczak said. Nearly three months later, the tobacco company is still trying to work it out. “It’s so bloody complex,” Mr. Olczak said in an April interview. “This one is really mind-blowing.”

Russia’s February invasion triggered an avalanche of Western sanctions, and hundreds of businesses have pledged to exit or cut back operations in Russia. Global companies have racked up more than $59 billion in losses from their Russian operations, with more financial pain to come as sanctions hit the economy, according to public statements and securities filings. Some companies without factories in Russia, such as Apple Inc., stopped shipments there. McDonald’s Corp. temporarily shut its restaurants and kept paying workers until it agreed to sell the restaurants to a local franchisee. For many companies, Russia hasn’t been an important market for sales or investment partly because of the political environment and sanctions imposed after the 2014 Russian annexation of Crimea from Ukraine. Less than 1% of revenue from 1,000 major U.S. and Canadian companies comes from Russia, Morgan Stanley analysts estimate. That wasn’t the case for Philip Morris, which distributes Marlboro cigarettes outside the U.S. The company entered the Soviet Union in 1977, when it signed a licensing agreement with the state-owned industry to manufacture Marlboros. It now has a factory in St. Petersburg and sales offices in about 100 cities.