Bloomberg News

Companies in Russia Urged to Dust Off Evacuation Plans

March 20, 2014

U.S. companies with operations in Russia should prepare for growing tensions by reviewing evacuation plans, tightening cybersecurity and being alert for a spike in anti-American sentiment, according to corporate-security analysts.

Non-essential travel to the country should also be delayed, said Brian Michael Jenkins, senior adviser to the president of the RAND Corp., which is based in Santa Monica, California, and provides research to governments and companies.

Executives “have to anticipate some kind of cyber-assault,” Jenkins said in an interview. And they should be aware of graffiti or other signs of “palpable increase in anti-American sentiment” and be prepared to evacuate personnel.

Related:

  • Ukraine Military Concedes on Crimea as Russia Takes Hold
  • Merkel Warns on Rush to Russia Sanctions, Reflecting EU Split
  • Putin’s Tools of Sabotage Beat Urgency of Ukraine Invasion

U.S.-based companies are the largest source of foreign investment in Russia, primarily in technology and financial services, according to a 2013 report by Ernst & Young. Business interests in the nation have expanded after Russia joined the World Trade Organization in 2012, the report said.

The U.S. and European Union imposed a round of sanctions against Russia on March 17 after the government in Moscow recognized Ukraine’s Crimea region as an independent state. While companies with investments in Russia, such as General Electric Co. (GE:US) and Boeing Co. (BA:US), are growing concerned, advisers say the current problems don’t warrant exiting the market.

Commercial Threat

“For now, everybody is holding their breath,” said Charles Hecker, global research director at Control Risks, a London-based group that says it helps companies operate in complex or hostile environments.

If U.S. sanctions ramp up, or the Ukraine crisis intensifies, the political tensions might pose a significant commercial threat to those companies operating in areas with greater political oversight, such as energy, he said.

“It breaks down to what kind of business you’re in, and what kind of work you’re doing,” Hecker said in an interview. “It’s incumbent on investors to begin to think about that now.”

There are signs Russians support President Vladimir Putin’s handling of the crisis, with his ratings the highest in three years. Seventy-two percent said they approve of his work as president, the independent Levada Center said March 13, citing a survey of 1,603 people that had a margin of error of 3.4 percentage points.

Great Power

In another poll this month, 63 percent of respondents said Russia is a great power, the highest reading in the 15 years the question has been asked. The Levada Center took the survey of 1,603 Russian adults March 7-10.

Maurice Taylor, chairman of industrial tire maker Titan International Inc. (TWI:US), said he is watching the dispute closely. In October, a partnership of his Quincy, Illinois-based company, JPMorgan Chase & Co. (JPM:US) and a Russian government fund invested $115 million to buy a Soviet-era tiremaker in Russia.

Taylor said he’s not sure how U.S. actions may impact his plans to make Voltyre-Prom more efficient and export tires to former Soviet bloc countries.

“There is no such thing as a perfectly safe deal,” Taylor, 69, said in a telephone interview. He said he plans to travel to Russia next month.

Two Risks

For corporations, additional sanctions from the U.S. present two risks: They could inadvertently punish U.S. interests, and the Russian government -- or independent actors - - could push back against American companies.

“They are worried about retaliation,” said William Reinsch, president of the National Foreign Trade Council, a Washington-based group that advocates on behalf of companies operating globally. “The Russians have been pretty clear that if we do something to them, they will hit back.”

What’s not clear is the form of an retaliation. It could be a formal ban on specific imports or individual tax audits of companies without any overt political agenda or declared link to the current tensions.

“We have seen U.S. firms subject to investigation to make sure tax forms are in order,” RAND’s Jenkins said. As those are sometimes conducted by armed commandos, “they can be intimidating.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Steve Geimann


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