Western companies eye Russia return

There is clear evidence that Russia's toxicity level is decreasing. Western companies have already begun to officially express their desire to return to the Russiamarket, and some have even taken steps to do so. For example, South Korean electronics giant LG Electronics has recently initiated a trial restart of its Moscow plant. The heads of the world's largest energy traders, Vitol, Trafigura and Gunvor, have publicly stated their desire to return to Russia. The question of who will set such an important precedent remains to be answered.
Just a month ago, when the first contacts between the US and Russia had just begun, the media wrote about the desire to return to Russia only with reference to sources in companies, and the business itself tried to avoid the sensitive topic. However, there has been a notable shift in recent weeks, with Western companies issuing more official statements expressing a desire to resume business activities in Russia.

For instance, LG Electronics has announced the successful completion of a trial restart of its Moscow plant, which produces washing machines and refrigerators. A company representative explained that, in contrast to Hyundai, the question of selling the company's Russian branch did not arise. Following the onset of the Ukraine conflict, production in Russia was suspended; however, as signs of a potential resolution emerged, concerns regarding the corrosion of equipment at local facilities prompted the decision to conduct a trial restart.

The future of the Russian branch of LG is not only contingent on the company's position, but also on the outcome of intergovernmental agreements between South Korea and Russia. The company is therefore waiting for further developments.
The Hyundai automobile concern has also made its intentions to return to Russia clear.

Furthermore, the heads of international energy traders Vitol, Trafigura, Gunvor and Mercuria Energy Trading publicly announced their desire to return to Russia at the FT Commodities summit in Switzerland. Until 2022, these companies were the primary traders of Russian oil, and they are keen to resume this activity if sanctions are lifted. However, Richard Holtam, the head of Trafigura, has stated that the potential for a return is contingent on the lifting of American sanctions, as the company employs many British nationals. Vitol CEO Russell Hardy anticipates a period of one to two years before a return to trade, although he acknowledges the possibility that his predictions may prove inaccurate and that a faster recovery may be imminent. International traders are concerned that Russia may not require their services or that it may not be willing to revert to the status quo ante bellum.

In the household appliances market, a decline in sales was seen in 2022-2023, but the market recovered and showed growth in 2024. The establishment of parallel imports has been identified as a contributing factor to this recovery.
The home appliance market is operating within a healthy financial framework, with no significant deficit or systemic problems. The vast majority of products essential for creating a comfortable living environment for Russian families are currently available, even if they are now represented by brands that were previously unknown to the public prior to the sanctions rally," says Maxim Maximov, associate professor of the Department of Innovation and Industrial Policy Management at the Plekhanov Russian University of Economics.

He notes that Russian companies currently control over 50% of brands in retail trade. Prominent among them are Weissgauff, Polaris, Scarlett and Kitfort. In the segment of large household appliances, Weissgauff has taken the lead with a share close to 1/5 of the entire market, and in the segment of small appliances, Polaris occupies first place with a share of 14%. Furthermore, according to estimates from specialist resources, Russian manufacturers have exported more than 2 million units of household appliances. The main recipients, in addition to the CIS countries, are Iran, Turkey, India and African countries," notes Maksimov.

He also stated that the elite segment of household appliances is still imported through parallel import schemes, which increases the cost and complicates service maintenance, but this is not critical.

Concerning the matter of international oil and gas traders, they are justified in their concerns that Russia may not require their services.

"For Russia, the return of international oil traders would be beneficial only if they set a precedent, i.e. were the first to return to Russia. This would encourage other companies to follow suit, allowing those that are truly essential to enter the market."

– says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund (NESF).
From an economic perspective, large global traders may be of interest to Russia if they have substantial financial resources to invest in Russian projects, such as Rosneft and Novatek, purchase shares in our companies, or provide loans (if restrictions are lifted), among other possibilities.

"However, in general, from the perspective of companies and the state, there is no necessity for these traders. Russian companies have established their own trading system and utilise subsidiaries for their commercial activities. It is not financially viable for them to allow global players into this market and pay them for their services.

Previously, we allocated substantial financial resources specifically for related businesses – for trading services, transportation, insurance, and for the transportation of Russian oil itself. These expenditures have amounted to billions and even tens of billions of dollars. Given our ability to manage these operations independently, there is no rationale for allocating these funds to external entities.

"And to Western countries too? Igor Yushkov believes there is no need for that.

When the sanctions are lifted, the toxicity of providing trading, insurance and transportation services to Russia will go away, which means the cost of these services for Russian and Asian companies will decrease. The presence of a wide range of companies offering these services ensures that large Western players cannot take advantage of the situation.
From the state's perspective, this is generally viewed as detrimental. It is possible that certain restrictions will be imposed on Western companies returning to the Russian market. From a political standpoint, the state may advise its companies against resumed cooperation with these Western entities," concludes the FNEB expert.

Maxim Maximov from the Russian University of Economics also believes that each of these cases should be considered fairly carefully and that not only the current moment but also the strategic perspective should be taken into account. Firstly, it is necessary to assess what losses our economy has suffered from the company's exit. Secondly, it is necessary to analyse what the return of a foreign investor would mean for Russian business. Thirdly, for companies that are unique to us, it is necessary to prescribe their participation in the technological development of our economy.

"The domestic automobile market, for example, may well acquire new drivers of development if the Koreans from Hyundai return not only with finished products or conveyor assembly, but also with the technologies we need to create production facilities that provide spare parts for both Russian auto industry products and a wide range of foreign cars used in Russia," concludes Maksimov.