Memo: Historic Sanctions

We are accustomed to stories of wartime sabotage. Bridges are blown, airfields are destroyed, and transport trucks incapacitated. But those were acts by armed forces. What we are witnessing now is the disruption of trade instigated by corporate boardrooms, not military war rooms. It’s beginning to have an effect.

The ongoing conflict in Ukraine will be remembered as a war of corporate intervention at a level not seen in previous wars. One by one, corporations are taking sides before many nations are. It’s divided the retail community, for one. The Chief Executive Officer of Uniqlo, Tadashi Yanai was recently quoted in Nikkei:

Clothing is a necessity of life. The people of Russia have the same right to live as we do.

The company’s 50 stores will continue to operate in Russia. Uniqlo is one of the last retail corporations to voice support for its commerce business in the country that is the aggressor in this war. Yanai’s stance is in the minority. Some of the world’s biggest brands have exited or suspended operations in Russia, putting an end to decades of post-USSR investment into the region, at least for now.

Since Russian troops invaded Ukraine on February 24, western companies have begun pulling out of Russia in a sign of anti-war sentiment and support for Ukraine. The motion spans across industries, with airlines, automobiles, tech giants, mass and luxury retailers, energy companies, consulting firms, logistics and shipping operators, financial firms, and media companies all halting operations in Russia.

Notable companies include Nike, which has closed stores and stopped eCommerce orders in Russia. Apple has stopped selling its products and ceased all exports to Russian sales channels. Google suspended advertising. H&M has also paused operations in the country.

And despite exemptions for luxury goods, higher-end fashion retailers have followed their peers with their own private sanctions against the country. Luxury conglomerates LVMH, Kering and Richemont plus Chanel, Hermès and Prada have closed stores and stopped shipments into Russia, cutting off wealthy shoppers’ spending. A recent report in the Guardian explained the ripple effect:

On Friday LVMH Moët Hennessy Louis Vuitton, owner of brands including Christian Dior, Givenchy and Bulgari, said it was shuttering its 124 boutiques in Russia from Sunday, while Kering, which owns Gucci and Saint Laurent, confirmed it would close its two shops in the country.

The private sanctions have extended to fintech. Visa, Mastercard and PayPal have blocked Russian banks from using their systems, while Apple Pay and Google Pay have also been blocked. In the entertainment industry, you’ll find more of the same. Disney has suspended movie releases in the country.

In the case of social media platforms, the Russian government made the first move in banning Meta platforms, YouTube and Twitter; TikTok then acted to stop streaming in the country in response to Russia’s fake news law enacted to control media narratives.

Ceasing business in Russia has been framed by a number of companies as an act of safety for employees and a response to a complex situation. Some companies including Nike have said they will keep paying employees’ salaries while businesses are closed. The goal is to put pressure on Vladimir Putin to put an end to his aggression towards a sovereign country. While the U.S. military industrial complex has been largely quiet, retailers and technology companies have seemingly taken to a different kind of war, amplifying the potential of long-term financial turmoil directly in response to the ongoing invasion. In this way, Russian citizens and millions of workers are the collateral damage. For western companies, the risk is hurting their own share prices. But the public pressure to signal support for Ukraine is a factor.

The war is playing out on social media in an unprecedented way, making it more difficult for businesses to carry on as usual. From TechCrunch, regarding TikTok’s decision to pull out of Russia:

​​TikTok has been a crucial platform of the war. The New Yorker called the conflict in Ukraine “the world’s first TikTok war” because of how Ukrainians have used the app to document the situation on the ground.

Not only are companies pulling out of Russia, they’re also sending support to Ukraine. Millions of dollars have been donated by corporations to UNICEF relief efforts. Elon Musk sent Starlink satellites to Ukraine to enable high-speed internet connections. And private citizens have departed the country to work along the border of Poland to aid refugees.

The decisions from major companies to pause operations in Russia will serve as a one-two punch when combined with western sanctions against Russia. Whether or not the combined efforts will hit Russia’s economy hard enough to have a material impact on the war remains to be seen, but what’s clear is just how interlaced politics and private corporations are today. In the internet’s war, silence seems to be an act of war for businesses. There has never been this type of galvanization around a cause. Once considered an expansion opportunity to countless western corporations, Russia is now the most sanctioned country on earth.

Let’s just hope that closed doors accomplish what ground troops and and weaponry have long been used for – winning wars.

By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams

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