Will Russia’s isolation last?

Many international businesses in tech and other industries are stopping work in Russia after the invasion of Ukraine.

It’s not clear how long the corporate solidarity to isolate Russia will last. Just look at past crises.

In 2018, operatives from Saudi Arabia murdered and dismembered Washington Post journalist Jamal Khashoggi, leading to swift condemnation of the kingdom, which US intelligence agencies found approved the planned assassination. Some, although far from all, foreign companies and tech powers pulled back from business deals with Saudi Arabia.

But within a half-year or so, many global companies were back.

The situations in Saudi Arabia and Russia are different, but both spotlight a problem for global corporations, particularly technology companies whose digital services transcend borders: Should you work in countries where the government’s behaviour is unacceptable?

Many tech executives embraced the belief that economic and cultural interconnections among nations, industries and citizens help prevent conflict and make everyone better off. But as my New York Times colleague Patricia Cohen wrote, Russia’s war is the latest challenge to the ideal of global engagement keeping the peace.

Powerful companies — particularly tech companies with their outsize public profiles and wealth — are increasingly under pressure from their customers, employees or elected officials to withdraw their business to push for change to government laws or norms around the world.

Global retailers have been pressured over claims that they profited from forced labour in China’s Xinjiang territory. Opponents of Texas’ abortion restrictions demanded that companies like Uber and Tesla take a stand against the law. Free speech proponents urged Facebook and Twitter to defy the Indian government’s bans on citizens opposing new agricultural laws.

Companies sometimes find themselves in a position to choose principles over profits, with often uncertain odds of systemic change.

After Khashoggi’s killing, some leaders in technology and other industries decided to distance themselves from Saudi Arabia.

Google and Amazon seemed to put on hold negotiations with Saudi government officials to build computer data centres. The Bill & Melinda Gates Foundation cancelled a pledge to a nonprofit led by Crown Prince Mohammed bin Salman, the de-facto ruler of the kingdom. Hollywood agency Endeavor gave back $US400 million ($547 million) from Saudi Arabia’s investment fund.

In many cases, international businesses lowered their public profile and resumed ties with Saudi Arabia when the heat died down. There was a lot of potential money at stake.

Responding to China’s government is the biggest challenge for global companies. Beijing imposed a sweeping national security law in 2020 that brought Hong Kong closer to China’s censorship and covert digital surveillance. Apple, Google, Facebook, Amazon and others responded by threatening to withdraw from the city.

My colleague Paul Mozur told me that tech companies mostly have stayed in Hong Kong, in part because it appears their worst fears — raids on the companies and employee arrests for not complying with the law — aren’t likely. He said the companies continued to evaluate every move or signal from the government.

‘The Saudi government and Saudi leadership grasped very quickly the importance of being integrated in international markets.Putin seems willing to throw that away.’

Middle East Institute senior fellow Karen E. Young

Each country poses unique challenges for global corporations doing business there. Russian President Vladimir Putin started an unprovoked war on a neighbouring country, and most of the world has united behind Ukraine. Businesses’ collective withdrawal from Russia — by choice or, in the case of Facebook, by being blocked by the government — is also different from their absence in long-isolated countries like Iran and North Korea.

Karen E. Young, a senior fellow at the Middle East Institute, said that Saudi Arabia and Russia were different in another respect.

“The Saudi government and Saudi leadership grasped very quickly the importance of being integrated in international markets,” she said. “Putin seems willing to throw that away.”

Jeffrey Sonnenfeld of the Yale School of Management wrote in Fortune that what he called the “great business retreat” from Russia might lead to a leadership change. He wrote that when international companies cut ties with South Africa decades ago, their actions amplified international government sanctions and helped end the country’s apartheid regime.

Gregory Fairchild, dean at the University of Virginia’s northern Virginia campus whose research has focused on corporate strategy and ethics, said that autocratic leaders in Russia and other countries might be calculating that foreign governments and corporations won’t sustain their revulsion and punishments.

“There is a half-life to the outrage that is tied to the news cycle,” Fairchild said. Many leaders “have enough evidence that we wouldn’t care for long.”

This article originally appeared in The New York Times.

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