Western businesses weigh cautious return as Russia sanctions show early signs of thaw

Kirill Dmitriev of Russia’s direct investments fund, appointed as President Putin’s envoy for negotiations with the US over Ukraine, has observed these undercurrents first-hand, noting in his recent press interviews discreet activity in sectors like technology and luxury goods. His assessment aligns with recent trademark filings that reveal subtle preparations by Western brands – such as Microsoft renewing protections, Chanel securing new registrations, and McDonald’s maintaining intellectual property rights despite publicly denying any plans to return. These moves suggest a tentative thaw, though one shrouded in corporate caution.

From his vantage point in Moscow, American Chamber of Commerce President Robert Agee has witnessed the uneven aftermath of the exodus. In an exclusive interview with the business daily RBC, Agee detailed how some companies have maintained minimal operations, preserving a foothold in the market, while others have severed ties completely, selling assets at steep discounts. The Financial Times recently revealed how Spanish fashion giant Inditex – owner of Zara – transferred its Russian operations to a supplier while maintaining a pathway for potential return, with unbranded clothing still circulating in stores under terms that could allow rapid rebranding. Other firms leverage Central Asian backchannels to keep products flowing while technically complying with sanctions. This spectrum of exit strategies, from complete withdrawal to structured hibernation, has created varying degrees of readiness for a potential return.

The recent resumption of US-Russia dialogue has sparked cautious optimism, but the path forward remains fraught with uncertainty and is dependent on Trump’s ability to play a positive role in bringing the conflict between Ukraine and Russia to an end.

Navigating a fragmented sanctions landscape

The regulatory environment presents a labyrinthine challenge with more than 18,000 sanctions imposed against Russia by different countries. While US sanctions may soften, EU restrictions remain firmly in place, forcing multinationals to consider convoluted workarounds. Against this backdrop, compliance burdens are expected to consume significant portions of profit margins before the first transaction even occurs.

For companies that exited Russia entirely, the obstacles are even more daunting. Abandoned facilities have deteriorated, supply chains have been reconfigured, and local competitors have filled the void. In the automotive sector, Chinese manufacturers now dominate, capturing 70 percent of the market, while UAE-based companies have become pivotal intermediaries, facilitating trade in a wide range of goods through Dubai’s re-export hubs. Even in industries where Western technology remains critical, such as aviation, workarounds have emerged, with grounded Boeing aircraft being stripped for parts to keep others operational.

The gradual path to re-engagement

Analysts anticipate a staggered return, with different sectors moving at varying speeds. Commodity traders, leveraging existing networks through Middle Eastern subsidiaries, are likely to be among the first to re-engage. Pharmaceutical and medical equipment firms may follow, capitalising on humanitarian exemptions. Luxury brands, meanwhile, are exploring parallel import channels, while technology companies are cautiously re-establishing local talent pools under new structures. However, this reopening comes with clear red lines: some Western brands that have proclaimed public support and investments in Ukraine will likely remain effectively barred from a return to Russia.

Rebuilding trust in a changed market

The psychological barriers to re-entry are as formidable as the legal ones. Moscow’s expatriate community, once thriving, has dwindled dramatically, leaving behind a sparse network of holdouts and adapters. Many former executives of Western firms now consult for local or Chinese competitors, their expertise repurposed in a reshaped commercial landscape.

Perceptions abroad further complicate the calculus. Despite relative stability in Moscow, Western media narratives continue to depict Russia as a high-risk environment, reinforcing hesitancy among potential returnees. This dissonance between on-the-ground realities and external perceptions adds another layer of complexity to corporate decision-making.

The tests ahead

The coming months will serve as critical indicators of the feasibility of large-scale re-engagement. The St Petersburg Economic Forum in June may reveal the willingness of some Western executives to publicly re-enter the Russian market. Meanwhile, the possibility of a diplomatic breakthrough – long hinted at but never materialised – could accelerate corporate preparations.

As Western companies weigh their return, they confront a transformed commercial landscape where competitors from China, Turkey, India and the UAE have aggressively expanded into the Russian market, filling critical gaps left by departing North American and European businesses.

For now, businesses remain in a state of suspended animation, simultaneously planning for reintegration and prolonged isolation. The delicate balance between opportunity and risk defines this moment, as companies weigh the costs of being left behind against the perils of moving too soon. The road back, if it materialises, will be neither straightforward nor uniform – a reflection of the deeply fractured landscape that sanctions have wrought.

About us

Risk Advisory has maintained a presence in Moscow since 1997, giving us a deep, real-time understanding of Russia’s political and business dynamics. We help clients cut through uncertainty – identifying reliable partners, assessing regulatory and sanctions exposure, and uncovering hidden challenges before they become costly mistakes.

Sanctions regimes remain complex and fluid, but opportunities may arise for those with the right insights. Our scenario-based investigations provide the clarity needed to make informed decisions – whether preparing for market shifts, mitigating compliance risks, or securing a competitive edge in a changing environment.