With Russia’s invasion of Ukraine, it has become clear that sustainable economic activity is not possible without freedom and democracy. After weeks of diplomatic efforts, dashed hopes and escalating threats from the Kremlin, Russia’s attack was no longer surprising – but no less shocking for that. We are undoubtedly experiencing a turning point, as Chancellor Scholz put it, for German politics. As is always the case with major turning points in history, this one has been a long time coming. Nevertheless, the consequences are not entirely foreseeable at present. What is clear, however, is that Vladimir Putin is prepared to pay an enormously high price to achieve his geopolitical goals. He will try to make those who oppose his goals pay an even higher price. Conversely, this means that a stable peace order, freedom and democracy also demand a price. A price that must be factored into the calculations of economic actors.
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Business and Autocracy
CEO surveys by PWC and EY showed even before the Russian invasion that geopolitical conflicts are definitely understood as a risk by decision-makers. Nonetheless, prior to the Ukraine war, German managers primarily saw economic opportunities in Russia and closely intertwined their business activities with the Kremlin. In the process, the indications of Putin’s increasingly aggressive basic stance, which are abundantly clear in retrospect, were brushed aside with reference to the “primacy of politics.” The then Siemens CEO Joe Kaeser met Putin in 2014 just 10 days after the latter’s annexation of Crimea in violation of international law, pointing out that one should not be unduly guided by “short-term turbulence in our long-term planning either.” OMV, E.ON (now Uniper), Shell, BASF/Wintershall and ENGIE also signed the Nord Stream 2 shareholder agreement with Gazprom in 2015, i.e. after the annexation of Crimea. Even the massive repression of Russian civil society or the uncovering of state-ordered murders abroad remained for the CEOs without consequences for Russia.
Today, it is clear that it is not enough to adjust messaging in social media channels and demonstrate consternation. At stake is whether a company’s operations stabilize the liberal world order as the foundation of our prosperity, freedom, and security. Many companies, for example many partners of Nord Stream 1, have not even commented on the current events yet.
Strict compliance is not enough
The necessary sanctions against Russia will also affect Western companies. Machinery, cars and other products worth 23 billion euros were shipped to Russia from Germany in 2020. Significantly more important, however, are the raw materials imported from Russia, especially gas and minerals. Companies from Germany also employ around 280,000 people in Russia.
It is not least the close ties and dependencies of German economic actors with and on the authoritarian regime in Moscow that have prevented an earlier and more decisive reaction. Moreover, this business activity has – at least indirectly – also filled the Russian war chest. This should now have become clear even to the last defenders of “purely private sector” relations with Russia. In authoritarian regimes, there is no clear separation between business and politics.
The sanctions against Russia are, of course, supported by all companies. But pure ‘legal compliance’ is no longer enough today. That’s why many companies are now going beyond the sanctions in their reactions. However, it is primarily those from non-German countries that are taking a pioneering role here.
The British oil company BP is withdrawing completely from the Russian Rosneft Group, Google has blocked the channels of the Russian state broadcaster RT (formerly Russia Today) on its platforms, and Apple has stopped selling its products in Russia and restricted its Apple Pay payment service. Only belatedly did German companies such as VW follow suit, halting exports to Russia as well as production there.
Si vis pacem para bellum
Responsible entrepreneurship means supporting and being able to support politically targeted economic sanctions without putting one’s own company in existential difficulties. It means reviewing one’s own economic activities to ensure that they do not ultimately strengthen and support the enemies of democracy and freedom, the autocrats and warmongers of this world. It means not closing our eyes to the fundamental differences in political and social values. It means taking an unambiguous position in the event of a crisis. At the latest, when it comes to the question of war and peace, economic interests can no longer be presented as an argument for alleged neutrality.
The Russian invasion of Ukraine makes it clear that corporate citizenship must also include the question of the political consequences of business decisions – short-term consequences as well as long-term geopolitical issues. One’s own action-driven interest in functioning economic relations cannot automatically be transferred to other actors, and economic cooperation elsewhere can be merely a means to a terrible end. Or, to put it another way, doing business with Putin’s Russia does not “wash the slate clean” of war.
What to do now
In light of current events, therefore, companies need to ask themselves three questions:
- Does our business activity – directly or indirectly – support Putin’s war?
- Can we adjust our business activities in the short term to strengthen peace and security?
- In the long term, how can we adjust our business strategy to ensure that we do not thereby undermine the peace of order, freedom and democracy?
Companies respond to the first question by suspending economic relations with Russia. It is necessary to review business activities and prevent warmongers from benefiting from relations or one’s own from benefiting from relations with them.
The second question had to be dealt with at the beginning of the military conflict, especially by companies that operate production or other business facilities in Ukraine. They must take care to protect their employees. But the question of what options a company has to make a contribution in a war situation also applies independently of this.
It is advisable to start with one’s own core business. This is where you have the most influence and the most expertise – and therefore also achieve the greatest effect. One example of this is Telekom, which has made calls and messages to Ukraine free of charge and abolished roaming charges in Ukraine. Similarly, Berlin’s public transport company is currently offering its transport services free of charge to people who have had to flee Ukraine. It’s not about “attitude,” it’s about action.
The third question is about reviewing one’s own economic relations. One should avoid becoming dependent on politically unpredictable partners, which makes one vulnerable to blackmail. This includes, at the latest now, giving serious thought to how a company can make itself independent of Russian energy imports as soon as possible. And also fundamentally, the question of economic relations with the Kremlin must be asked.
Companies must critically review their economic interdependencies and dependencies in order to become resilient in the face of unpredictable actors. They must reflect on which interests they serve through their activities. Economic relationships do not necessarily lead to peace and rapprochement. They can also fill war chests, stabilize authoritarian regimes, and enable violence.
Many of the necessary measures will hit businesses hard. But these investments in our political, economic and social freedom are the basis of sustainable value creation. Because without freedom and democracy, there is no sustainability.
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