With the west’s severe financial penalties in place and firms fleeing Russian activities, the spotlight is now on enterprises that have yet to take a stand.
While numerous business giants such as Nike, Apple, ExxonMobil, and Harley-Davidson have exited Russia, some of the country’s most well-known corporations remain, at least for the time being.
McDonald’s and Pepsi were singled out by the chief of the New York state pension fund overnight.
According to Reuters, corporations “need to consider whether doing business in Russia is worth the risk during this extraordinarily volatile time” according to Thomas DiNapoli, comptroller of the $110.8 billion New York State Common Retirement Fund.
He continued, ” “The world economy is threatened by Russia’s unjustified invasion of Ukraine and its highly unpredictable foreign policy.
“We’re encouraging the companies we invest in to do a risk analysis and determine what is in the best interests of their company and their shareholders.”
The first Western brand to be manufactured in Russia and sold there.
McDonald’s and Pepsi were two of the first foreign corporations to enter the former Soviet Union.
The first western brand developed and distributed in the state was Pepsi. At the American National Exhibition in Moscow in 1959, its head of foreign operations Donald Kendall, who eventually became CEO, famously delivered a Pepsi to Nikita Khrushchev, then the former Soviet premier.
The drink entered the Soviet Union little over 14 years later, several years ahead of its rival Coca-Cola.
Meanwhile, the Communist Party granted McDonald’s permission to start in the country in 1988, and the company’s first store opened in Moscow’s Pushkinskaya Square at the end of January 1990. 5,000 people waited in line for up to six hours to get inside the country’s first fast food restaurant.
There are no plans to prohibit Russians.
It’s one thing to deprive Russians of their burgers and soda. But there is another, potentially more serious, missing from the list of organisations adopting sanctions on Russia so far: the cryptocurrency space.
Coinbase and Binance, two cryptocurrency exchanges, have frequently stated – and reiterated today – that they have no intention of barring Russians from using their systems.
This has aroused fears that some Russians, particularly those who have had their assets frozen by the US, the EU, or the UK, will use it to evade financial sanctions.
The US Treasury has instructed exchanges not to support transactions by sanctioned individuals or organizations, and France’s finance minister, Bruno Le Maire, has stated that the bloc may apply limits to ensure that this remains the case. Christine Lagarde, the president of the European Central Bank, is said to have pushed for this as well.
Ukraine’s deputy prime minister, Mykhailo Fedorov, tweeted on Wednesday: “I’m requesting that all major cryptocurrency exchanges restrict Russian users’ addresses.
“It is crucial to freeze not only addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”
However, Brian Armstrong, Coinbase’s co-founder and CEO, claimed today that the business was not undermining sanctions and that it would abide by the law.
He added in a series of tweets: “We don’t believe that Russian oligarchs would use crypto to circumvent sanctions. Attempting to smuggle large sums of money using crypto would be more traceable than using US dollars, cash, art, gold, or other valuables because it is an open ledger.
“Furthermore, we are not prohibiting all Russians from using Coinbase ahead of time. Unless the law states differently, we believe that everyone deserves access to fundamental financial services.
“Now that their currency has collapsed, some ordinary Russians are turning to cryptocurrency as a lifeline. Many of them are likely to be opposed to what their country is doing, and a ban would be detrimental to them as well. However, if the US government decides to enforce a ban, we will, of course, abide by the rules.
“Because sanctions are a complicated subject with rapidly changing circumstances, we’ll continue to collaborate with law enforcement and governments and take additional steps as appropriate. Of course, we’ll continue to work to make crypto services available to Ukrainians who are in need.”
Binance holds a similar viewpoint. According to CNBC, it stated: “We are not going to freeze the accounts of millions of innocent individuals on our own.
“To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.”
What is undeniable is that cryptocurrency transaction volumes exploded in the days following the announcement that Russian banks would be blocked from SWIFT, the interbank communications system that facilitates cross-border payments.
Bitcoin’s price has risen by slightly under 7% this week, while Ethereum and Dogecoin’s prices have remained relatively steady this week after spiking upward on Monday and Tuesday.
Supporters of cryptocurrency exchanges believe that even if Russians were barred from using their platforms, it would be insignificant because there are so many other exchanges where they could trade the currencies.
It also appears unlikely that crypto will be of any assistance to any oligarchs whose assets have been frozen, as Mr Armstrong claims, because those transactions would be more easily monitored.
Another important aspect is the relative shallowness of the cryptocurrency markets. Even at the high levels seen earlier this week, cryptocurrency transaction volumes are only a few billion dollars. That may appear to be a large sum of money, but it pales in comparison to the nearly $7 trillion that changes hands on a daily basis in the foreign exchange markets.
It’s also a minor sum in comparison to the sums sanctioned oligarchs and businesses are attempting to shift. An oligarch attempting to move $5 billion through the crypto markets would be discovered soon.
The current crisis, on the other hand, appears to be a watershed point in the history of cryptocurrencies, possibly heralding a period in which the asset is subjected to more stringent regulation than it has been thus far.
