US firms operating in Russia contributed over $1 billion in taxes to the Kremlin in 2023, as per the Newsweek report referring to data from B4Ukraine and the Kyiv School of Economics (KSE).
This makes the US the largest foreign contributor of profit taxes to Russia, according to the report.
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Since Russia’s invasion of Ukraine on Feb. 24, 2022, many companies worldwide have exited the country. However, a significant number have stayed. According to the Yale School of Management’s Chief Executive Leadership Institute (CELI), 123 major US companies continue operations in Russia to varying extents.
The KSE, which includes mid-size and smaller firms in its analysis, estimates that approximately 328 US companies are still active in the country.
According to new research, the top 10 US companies that paid the most profit taxes to Russia in 2023 were:
- Philip Morris International (Tobacco) - $220 million
- PepsiCo (Beverage) - $135 million
- Mars (Confectionary) - $99 million
- Procter & Gamble (Health and hygiene goods) - $67 million
- Mondelez (Confectionary) - $62 million
- Citigroup (Investment banking) - $53 million
- Cargill (Agriculture) - $50 million
- Johnson & Johnson (Pharmaceuticals) - $42 million
- Coca-Cola Hellenic (Soft-drink bottling) - $34 million
- Weatherford (Oilfield services) - $32 million
Despite scaling back operations, these companies continued essential business activities, citing challenges in exiting Russia.
Philip Morris International suspended planned investments and scaled back its manufacturing operations after Russia began its full-scale invasion of Ukraine. In February 2023, CEO Jacek Olzak told the Financial Times that the company refused to sell its Russian business on the Kremlin’s terms though, as it would result in significant financial losses.
Mondelez, on the other hand, has remained in Russia, saying that investors were not “morally concerned” about companies continuing operations there.
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Although Coca-Cola ceased selling its drinks in Russia, its regional bottler, Coca-Cola Hellenic, continues to sell a product called Dobry Cola through Multon Partners. Coca-Cola holds a 21% stake in Coca-Cola Hellenic and reportedly applied to re-register its trademarks in Russia in April 2024.
Meanwhile, PepsiCo, Mars, Procter & Gamble (P&G), Cargill, and Weatherford have scaled back their operations but still produce goods and manage essential operations.
In September 2024, Citigroup announced that it was winding down its operations in Russia. A spokesperson said that the bank was ending nearly all of its institutional banking business in the country, except operations required to fulfill legal and regulatory obligations. He also added that Citigroup was in the process of closing its Russian consumer banking business.
Aside from the US, the second-largest contributor of profit tax to the Kremlin in 2023 was Germany, as German companies paid $693 million in tax to Russia. Austria came in third, with firms paying Putin’s regime $579 million in profit taxes.
Hilary Ingham, a professor in economics at the University of Lancaster in the UK, said that US companies may be shoring up Russian support for the war by giving its citizens access to Western goods.
“It is conceivable that popular support for the war amongst Russians might be severely hampered if they are unable to purchase US goods,” she told Newsweek.
Despite the pressure, leaving Russia is not without its problems, the report said. The Russian government charges companies that leave the country a 15% exit tax and they are forced to sell their assets at a 50% discount. The exit tax generated $385 million for the Kremlin between January and March 2024.
A further financial headache for firms who wish to exit the country is coming. In 2025, the corporate profit tax rate will increase from 20% to 25%, according to the Russian Tax Code.
Experts say that business ties between adversaries during conflict are a reality of interconnected global markets, the report adds.
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