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French companies grapple with staying in Russia despite mounting public pressure

PARIS — As famous brands from IKEA and McDonald’s to Netflix pull out from Russia, major French companies are staying put there, drawing public criticism at home and from the Ukrainian government.

Following the invasion of Ukraine, French businesses such as energy giant TotalEnergies and retail brands Auchan and Leroy Merlin have been called out for maintaining their activities in Russia, including by Ukrainian President Volodymyr Zelenskyy.

“French companies must leave the Russian market … Renault, Auchan, Leroy Merlin and others must stop sponsoring the Russian war machine,” Zelenskyy told the French parliament Wednesday. Ukraine’s Foreign Minister Dmytro Kuleba even called on customers globally to boycott carmaker Renault, which had restarted car production at its Moscow plant this week after resolving supply chain issues.

The automaker announced late Wednesday that it was suspending its operations in Russia, and was “assessing the available options” for its stake in Lada-maker AvtoVAZ.

French banks BNP Paribas and Crédit Agricole said Tuesday they would stop operating in Russia, while bank Société Générale did not make similar announcements.

Meanwhile, TotalEnergies said it couldn’t just pull the plug on buying Russian gas and will stay in Russia though it will stop buying Russian oil and petroleum products by the end of the year.

Retailers Leroy Merlin, Auchan and Decathlon – all controlled by the Mulliez family – are also keeping their stores in Russia open, even after a Leroy Merlin outlet in Ukraine was reportedly bombed by Russia last week. The Ukrainian defense ministry slammed the DIY home-improvement chain for being “the first company in the world to finance the bombing of its own stores and killing its own employees.”

According to industry experts, it is hard for foreign businesses to leave Russia.

“You don’t just turn the key in the door and walk away,” said a French industry lobbyist, requesting anonymity as he was not authorized to speak publicly on the matter. He added that, so far, “no European government has asked businesses to leave.”

Companies that decide to leave the country “abandon their assets, which end up in the hands of Russian oligarchs,” the lobbyist said. He also pointed to Russian plans to nationalize assets of foreign firms that have left Russia.

TotalEnergies stressed in a statement that divesting in Russia would ultimately “enrich Russian investors, in contradiction with the [Western] sanctions’ purpose” given the difficulty in finding non-Russian buyers.

Philippe Zimmermann, director general of Adeo, the parent company of Leroy Merlin, said he was “hurt” by Zelenskyy’s comments. “This [kind of discourse] can endanger our employees,” he told La Voix du Nord newspaper, confirming what he called “a difficult decision” to keep stores open in Russia.

Despite the pressure of public opinion, Paris has not told French businesses to suspend their activities in Russia.

A senior French official conceded that the future for French companies operating in Russia looked uncertain, but noted that the government has to respect corporate decisions and their property rights on assets in Russia. “The position of French and European businesses in Russia is going to become unbearable,” the official told POLITICO. “But we can’t ask them to move too fast.”

Earlier this month, Economy Minister Bruno Le Maire said there was “a problem of principle in working with any political or economic figure close to Russian power.” Le Maire, who once said France was fighting “an economic war” against Russia, later toned down his approach, noting that French energy groups such as TotalEnergies or Engie staying in Russia did not violate EU sanctions.

Total on the front line

TotalEnergies, in particular, appears to have become target No. 1 for both political and public opposition to French businesses carrying on their operations in Russia.

The energy giant is also active in Russia through shareholdings in local energy companies such as liquefied natural gas (LNG) champion Novatek. TotalEnergies joined with Novatek for two major LNG projects in Siberia: the so-called Yamal and Arctic LNG 2 projects. Gennady Timchenko, a Russian businessman close to President Vladimir Putin, resigned from Novatek’s board this week after he was targeted by EU sanctions, but he remains a major investor in the company.

The first LNG cargo from the Yamal plant was carried in 2017 by an ice-breaker tanker named after TotalEnergie’s former boss, Christophe de Margerie, painted with a large grey moustache on the bow in homage to de Margerie’s trademark moustache. Putin attended the plant’s opening ceremony and in his speech celebrated his “friend” de Margerie, who had died in 2014 in an aircraft accident in Moscow.

TotalEnergies has particularly close ties with Russia compared with other large foreign energy companies such as Shell and BP, noted Thomas Pellerin-Carlin, director of the Jacques Delors Institute’s energy center. “Total has bet heavily on Putin and Russia to develop, especially in the gas and liquefied natural gas sector,” he said, noting that the company had built “good relations with the Russian oligarchs and with Putin himself during the last years.”

Earlier this week, activists organized a demonstration in front of Total’s headquarters in Paris and NGOs threatened to take the company to court if it didn’t cut its ties with Russia. Green presidential candidate Yannick Jadot has gone as far as to accuse Total of being “complicit in war crimes in Ukraine.”

“It is also up to the French government today to take a clear position towards Total and to clearly order this multinational to withdraw from Russia. For us, as long as this is not done, the position of the French government is hypocritical towards the Kremlin and towards what is happening in Ukraine,” said Lorette Philippot from environmental group Amis de la Terre.

As the pressure mounts, TotalEnergies said Tuesday that it would stop buying oil products from Russia, but would not quit the country and would continue to buy its gas.

“At this stage, European governments have not decided to sanction Russian gas, because we need it. Why would you want me, TotalEnergies, to stop Russian gas even if I cannot replace it?” CEO Patrick Pouyanné told RTL radio on Wednesday.

This article is part of POLITICO Pro

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