By Jeanne Whalen

Russia is dangling the promise of new investment opportunities for American companies as the Trump administration seeks an end to the war in Ukraine, from energy and critical minerals to space cooperation with Elon Musk.

But the opportunities for Western businesses will likely be limited, even if there is a full restoration of economic ties with Moscow. President Vladimir Putin has put caveats on potential cooperation, and many Western firms would hesitate to make new investments as they weigh the political uncertainties and reputational risks.

The potential for a thaw in Moscow's ties with Washington gained fresh momentum Tuesday as Putin agreed to pause strikes on Ukrainian energy infrastructure. A call between President Trump and Putin largely focused on the conflict but also addressed potential economic cooperation, according to White House and Kremlin readouts.

But just before speaking to Trump on Tuesday, Putin addressed a Russian business convention, where he stressed that government policy would still favor Russian companies if Western sanctions were eased. He also chastised foreign companies that "demonstratively slammed the door" when they quit Russia after its invasion of Ukraine.

"If th niches of Western companies are already filled by Russian business, then...the train has left the station. There will be no privileges or preferential terms for returning companies," he said, adding that companies that sold Russian assets on the cheap when they left wouldn't be allowed to repurchase them for the same low price.

The Western firms that would be best positioned to profit immediately after any thaw would likely be those that never left Russia or the ones that could easily begin exporting to the country again without having to make long-term investments, economists say.

"Whoever is still there would have a huge advantage, so they would be rewarded for staying there despite the war, which is a bit problematic," said Janis Kluge, an economist at the German Institute for International and Security Affairs.

Russia's 2022 invasion set off one of the biggest corporate exoduses in history as Western allies hit Moscow with a wave of sanctions, prohibiting many types of trade and investment. Many companies have painful memories of how difficult it was to get out. The Kremlin seized the assets of some companies, including those of French food producer Danone, Danish brewer Carlsberg and energy giant Exxon.

The Russian economy has held up through more than three years of war largely because of its ability to continue exporting oil, particularly to China and India. But it is now slowing under the weight of the sanctions, inflation and rising interest rates, making it a less attractive place to invest. Even if the U.S. were to ease sanctions, Europe is unlikely to follow suit quickly, leaving Russia a compliance nightmare for international companies.

Russia's political and economic climate today contrasts starkly with the era after the fall of the Soviet Union, when Western oil-and-gas companies, fast-food chains and consumer brands flocked to the previously off-limits market. Corruption and lawlessness abounded, but there was a sense that many foreign firms were welcomed by Moscow and Russian industries that needed partners, said Konstantin Sonin, a Russian economist at the University of Chicago.

These days, "Putin is not interested in creating any kind of friendly climate," Sonin said. "The climate has not been friendly for some years."

Putin in recent days has suggested American companies could join projects exploring Russia's rare-earth mineral deposits, while other officials have pointed to potential joint energy development in the Arctic. Kremlin envoy Kirill Dmitriev said Tuesday that Russia plans to speak with Musk about a possible mission to Mars.

As of January, nearly 500 international companies had left Russia completely since the 2022 invasion, according to the Kyiv School of Economics. Another 1,300 had announced departures but hadn't completed them.

A rapprochement could benefit some of the 2,200 foreign firms that stayed in Russia. Many said leaving would have put their businesses and employees at risk.

Those include big food companies such as PepsiCo, Nestlé and Mars. The companies, which are selling scaled-back product lines, maintained some local production that they could potentially expand if relations improved. Pepsi said it is following developments but declined to comment on its plans. Nestlé and Mars didn't respond to requests for comment.

Another firm that remained, Houston-based oil-field service provider SLB, which supplies equipment and know-how to modernize oil production, could also be well positioned to pursue new business there again, economists said. SLB didn't respond to a request for comment.

Some businesses that continue to operate in Russia say they are backing away or hoping to leave. Austria's Raiffeisen Bank, one of the last remaining Western financial institutions in Russia, said it is complying with a European Central Bank order to shrink its business there. A Raiffeisen spokesman said the bank is considering a possible partial sale of its Russia subsidiary. The chief executive of another Western lender, Italy's UniCredit, said last month the bank wants to exit its Russia business and hopes that an end to the war would allow it to sell the unit at a fair price.

The country of 140 million people isn't big enough for many companies to take the reputational risk, particularly if any peace deal angers Western consumers by shortchanging Ukraine, analysts said. Russia "is nothing compared to economies like India or China," said Laura Solanko, a Russia expert and senior adviser at the Bank of Finland Institute for Economies in Transition.

Companies exporting goods or services to Russia, such as aircraft manufacturers, automakers and software developers, might consider re-engaging before those that would need to re-establish bricks-and-mortar assets requiring long-term stability, such as McDonald's, Starbucks and Exxon, analysts said.

"Cars could come back. How long does it take to ship cars from Bavaria to Russia? A couple of weeks. But McDonald's needs to have physical assets and suppliers there," said Maxim Mironov, a Russian economist and professor at IE Business School in Madrid.

Gaining access to Western aircraft and parts again will be one of Russia's top priorities in any thaw, analysts said. Sanctions forced Boeing and Airbus to stop selling jets, components and maintenance services to Russian customers, which left Aeroflot and other Russian carriers struggling to maintain their fleets.

An Airbus spokesman said it was "too speculative" to comment on a possible thaw, and that the company continues to follow sanctions. Boeing declined to comment.

Retailers and restaurant chains weren't generally required by sanctions to quit Russia but some did out of opposition to Putin's invasion, including McDonald's and Starbucks, which sold hundreds of stores to local investors. McDonald's restaurants now operate under the "Tasty & That's It" brand. Starbucks is called "Stars Coffee."

Any return could be politically fraught. Russia's deputy prime minister said Moscow will require returning retail chains to open shops in regions of Ukraine seized by the Russian army. Starbucks declined to comment. McDonald's didn't respond to a request for comment.

Oil companies in particular made big money in Russia before cutting ties. BP's ownership stake in Russian oil company Rosneft, for example, accounted for a third of the British company's oil-and-gas production and more than half of its reserves before BP dumped the holding.

But the long investment timelines and political uncertainties might make some energy projects unappealing to Western companies now, said Laurent Ruseckas, an energy expert at S&P Global.

What's more, some major oil companies left Russia in messy exits that may be hard to reverse or forget. When Exxon backed out of the Sakhalin-1 oil-and-gas venture in Russia's Far East, the Kremlin blocked the company's efforts to sell its 30% stake and transferred it to a Russian entity, a move Exxon described as expropriation. Exxon didn't respond to a request for comment.

Asked about the possibility of a thaw last month during an earnings call, BP's chief executive said the company is still trying to sell its 20% stake in Rosneft three years after it walked away from Russia and took a $25.5 billion charge on its holdings.

"There are more than a dozen countries that have sanctions on the entity, " CEO Murray Auchincloss said, referring to Rosneft. "We think the best focus that we can have is on continuing to divest this."

Write to Jeanne Whalen at Jeanne.Whalen@wsj.com

(END) Dow Jones Newswires

March 20, 2025 23:00 ET (03:00 GMT)

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