May 16, 2022
The American food chain McDonald’s announced that it has decided to sell all its branches in Russia due to the ongoing war in Ukraine.
McDonald’s said the humanitarian crisis caused by the conflict had contributed to an “unpredictable” business environment.
This coincides with the announcement of the French car manufacturer Renault that it is ending its activities in Russia, as it said it intends to sell its majority stake in AvtoVAZ.
McDonald’s opened its first branch in Moscow in 1990, while the Soviet Union was opening its economy to Western companies.
Last March, the company temporarily closed all its 850 branches in Russia.
McDonald’s said it is seeking to sell all of its restaurants in Russia to a local buyer and plans to begin the process of removing branded signs so that it will no longer be able to use the McDonald’s name, brand and menu.
But it said it would continue to keep its trademarks in Russia.
The company’s chief executive, Chris Kempczynski, said the announcement was “extremely challenging” but the company wanted to stick to its values.
These moves would cost McDonald’s and Renault billions of dollars in write-offs.
Renault, which made the decision under pressure from its presence in Russia, said it would sell its 68 percent stake in AvtoVAZ to a Russian scientific institution, while its stake in Renault Russia would go to Moscow.
Moscow said Renault’s assets in Russia had become the property of the Russian state.
This is the first nationalization of a large foreign business since the Russian invasion of Ukraine.
The Russian Ministry of Industry and Trade said agreements were signed to transfer the Russian assets of the Renault group to the Russian Federation and the Moscow government.
picture released, Getty Images
Auto assembly line for Renault in Moscow.
Financial details of the deal are not yet available, but Russia’s Industry and Trade Minister Denis Manturov said in April that Renault planned to sell its assets in Russia for “one symbolic ruble”.
The Renault Group said in a statement on Monday that its board of directors approved the agreements to sell Renault Russia to the Moscow City Council, as well as its stake in AvtoVAZ to the Russian Central Institute for Research and Development of Automobiles and Engines.
The deal also included the Renault plant in Moscow “Avtoframos”, which makes Renault and Nissan cars.
Moscow Mayor Sergei Sobyanin said production at the plant would now resume under the Soviet-era brand name “Moskvich”.
“Today we made a difficult but necessary decision, making a responsible choice towards our 45,000 employees in Russia, while maintaining the performance of the group and our ability to return to the country in the future, in a different context,” said Renault President Luca de Meo.
The agreement, which Renault said will cost the company an estimated 2.2 billion euros, includes an option for the group to buy back its stake in AvtoVAZ for a period of six years.
It is noteworthy that “AvtoVAZ” is the largest Russian car manufacturer, which manufactures the famous “Lada”.
In March, Renault announced the suspension of its operations at its Moscow plant.
This came after Ukrainian President Volodymyr Zelensky called on Renault and other French companies to leave Russia, accusing them of “financing the killers of women and children”.
Hundreds of international brands, including Starbucks, Coca-Cola, Levi’s and Apple, have left Russia since its invasion of Ukraine in February, with many now looking to sell their businesses in the country.
Last week, energy giant Shell announced that it had agreed to sell more than 400 of its oil stations in Russia to Lukoil, the country’s second largest oil producer.
Moscow had warned earlier that it might nationalize production plants or factories that have stopped working.
In the early stages of the conflict, Renault used a predatory tactic, choosing to stay in Russia while other international trading firms were leaving, says Theo Leggett, the BBC’s trade and business editor.
But after being mentioned by name by Ukraine’s president, who said Western companies in Russia were helping to fund Vladimir Putin’s war, it halted operations in late March.
Leggett notes that it would be costly for Renault to abandon its business in Russia, as it would lose a large market that was seen as a key arena for growth.