War in Ukraine: Renault, TotalEnergies, Leroy Merlin… What are the arguments of French companies that remain in Russia?

“French companies must leave the Russian market.” In his videoconference speech to French parliamentarians on Wednesday March 23, Volodymyr Zelensky again called for the departure of French companies based in Russia. “Renault, Auchan, Leroy Merlin and others (…) must stop sponsoring Russia’s war machine” and “to finance the murder of children and women, rape”thundered the Ukrainian president, while his country has been confronted for a month with the assaults of the Russian army.

Before the start of the war in Ukraine, more than 500 French companies, including 35 CAC 40 groups, operated in Russia, according to the French Ministry of Economy. Russia is France’s 7th largest market outside the European Union, according to Bercy. And France is the largest foreign employer in Russia, with some 160,000 employees.

Since the outbreak of the conflict, major French luxury groups – such as Hermès, Chanel, LVMH and Kering – have announced the closure of their stores in Russia. But not all French companies have made this choice. Under fire from critics for several days, several major groups have however made major announcements recently.

Renault “suspends” the activity of its Moscow plant

Targeted by Volodymyr Zelensky, Renault announced Wednesday evening to immediately suspend the activities of its Moscow factory. In his press releasethe group says “that it is already implementing the necessary measures to comply with international sanctions”. Management also claims to want “acting responsibly towards its 45,000 employees in Russia”.

The economic stakes are high for the diamond brand. With nearly 500,000 vehicles sold in 2021, Russia is its second largest market in the world. The car manufacturer has already announced that it is reviewing its financial outlook for the year 2022, with “a group operating margin of around 3%”compared to 4% previously.

This announcement does not mean that Renault leaves the country. The group will evaluate “the possible options concerning his participation” in its large Russian subsidiary, AvtoVAZ, which it bought out at 69% at the end of 2016. A major investor, the car manufacturer fears forced nationalization in the event of departure. AvtoVAZ notably has a gigantic factory in Togliatti, in the southwest of Russia, which employs 35,000 people. The firm announced on March 16 to send its employees on paid leave for three weeks due to a shortage of imported components, linked to Western sanctions due to the invasion of Ukraine.

Finally, the group remains particularly exposed, by its associate status with the Russian public conglomerate Rostec (defense, aerospace, technologies, etc.), headed by Sergey Tchemezov, an ally of Vladimir Putin.

Leroy Merlin remains for fear of “an expropriation”

Leroy Merlin will not cease his activity in Russia. Adeo, the holding company of the Mulliez family which owns the brand as well as Auchan and Decathlon, responded to pressure from its Ukrainian and French employees and from the political class of the two countries in a statement to AFP on Wednesday. A closure would be considered a “premeditated bankruptcy”, “opening the way to an expropriation which would strengthen the financial means of Russia”, she argues. Adeo, on the other hand, claims to have “decided at the beginning of the conflict to suspend new investments” in Russia.

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The sums at stake are significant: in 2020, Leroy Merlin declared 4.2 billion euros in turnover in Russia. Russia represents 18% of its overall activity, placing the country as the second market after France. The profit made “is not the question at all” and happens to be “free fall” in Russia, replies the managing director of Adeo, Philippe Zimmermann, in The voice of the North, Wednesday.

Philippe Zimmermann, known as “to understand” the position of the Ukrainian president, but also to feel “offended at being seen as sponsors of the war”. “We have no reason to condemn our Russian teams for a war they did not choose”, also argues Adeo, while Leroy Merlin says he has 45,000 employees in Russia, for around a hundred stores. Same argument from Philippe Zimmermann. “This can endanger our employees. In Poland, we are already having aggressive reactions”he laments. However, if Emmanuel Macron asked the brand to leave the Russian market, “it would be different”, said the managing director of Adeo.

Auchan for its part did not wish to comment after the intervention of Volodymyr Zelensky before the French Parliament. Another brand of the Mulliez family association with a strong presence in Russia, it has 231 Russian stores for a turnover of 3.2 billion euros, or more than 10% of its global business.

TotalEnergies stops buying oil, but not gas

A little earlier in the week, on Tuesday, TotalEnergies announced that it would cease all purchases of oil, but also of Russian petroleum products by the end of 2022. The energy group is heavily dependent on Russia, since 16.6% of its hydrocarbons are products in the country. On the other hand, the member of the CAC 40 will not interrupt its purchases of Russian gas, its dependence on this gas being too high (30%). The CEO of TotalEnergies, Patrick Pouyanné, said on Wednesday that his group could not give up this hydrocarbon, explaining that it had subscribed “25-year contracts”.

Involved in the Yamal gas field, in Arctic Siberia, TotalEnergies notably holds a 20% stake in Yamal LNG, a liquefied natural gas project which started production in 2020. The group also holds 19.4% of the Russian gas giant Novatek.

The environmental candidate for the presidential Yannick Jadot accused the energy company of “complicity in war crimes”an accusation to which the group responded with the announcement of a defamation complaint against the MEP.

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