If you can detach yourself from the humanitarian horror in Ukraine, there’s a certain grisly fascination in watching the Russian economy implode.

According to the IMF, Russian GDP is one tenth that of the European Union.  Wars are expensive and should the bloody subjugation of Ukraine become protracted, Mr Putin will have to ramp up spending.

While the glitzy boutiques of Moscow suggest otherwise, Russia is a relatively poor country – last year average household income was $6,500 (in the UK the average is $32,000).

Russian interest rates are at 20% and inflation is forecast to hit 20% later in the year.  GDP is expected to contract by 8%.

The withdrawal of Western brands adds to the pressure on the economy.  Over 300 companies have pulled out thus far according to an authoritative list kept by the Yale School of Management.  Adidas, Boeing, Daimler, Deloitte, GE, GM, IBM, BP, Kellogg’s, LVMH, Proctor & Gamble, Samsung, Starbucks and Unilever are all on the list which has been widely published by all forms of media including the New York Times, the BBC, CBS News, SKY and the Yorkshire Post.

Job losses caused by the departure of western brands are expected to be in the tens of thousands, adding to the squeeze on the economy.  There’s also the psychological effect of diminished variety symbolized by a Red Square GUM store denuded of western luxury goods.

American and European leasing companies are attempting to recover over 400 aircraft from Russian airlines.  They are unlikely to succeed.  

Many of those leased aircraft are sitting idle while banned from EU and US airspace, something that adds to the sense the Russian people have of being encircled by a new iron curtain and cut off from the prosperity that a globalised economy brings.

By acting quickly, the brands that have left Russia have minimised reputational damage.  Many British consumers will welcome such swift and decisive action.

However, some European and American brands are still trading in Russia.  Burger King, General Mills, Pirelli, Mars, Dunkin Donuts and Anheuser-Busch InBev (who brew Stella Artois and Budwesier) are all still there.  The ever-alert Yale School of Management have compiled a list of those companies still operating in Russia and in recent days the Daily Telegraph and the BBC (among others) have listed those companies.

There are strong business reasons for some operators to stay (not least the Russian government banning the sale of Russian assets).  However, as the war becomes more vicious and the humanitarian costs mount, corporate reputations will be tarnished.

There are also accidental winners from the war. 

Germany and Sweden have both recently announced that they will significantly increase their spending on defence. Shares in both BAE Systems (the largest defence contractor in Europe) and Raytheon Technologies in the US soared after February 24th.

Shares in BAE Systems currently trade at around 727 pence; at the beginning of the year, they had a value of 554 pence.  Ethically minded folk – and some ESG funds – have eschewed defence contractors and their trade.  Those attitudes may change now as governments no longer take peace for granted and tool-up for a more confrontational era.

The savagery of the Russian invasion has shocked the world and it has changed how we think.  By early March 76% of Britons supported the idea of resettling Ukrainian refugees in the UK.  This brutal war elicits empathy and will make ethical consumers of us all. Those western brands still operating in Russia may well discover the strength of that feeling.


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