Financiers of war: The taxes paid by Auchan, Leroy Merlin and Metro to the russia's budget can finance 4-5 massive shellings of Ukraine. Why have global retailers still not left russia?
And how many multinational companies still remain in the russian market?
Since the beginning of russia's full-scale invasion of Ukraine, the russian division of the French chain Auchan has been supplying goods to the russian military in the temporarily occupied Ukrainian territories. This was revealed in a joint investigation by The Insider, Le Monde and Bellingcat. The goods were positioned as "humanitarian aid." In some regions, deliveries were arranged in direct cooperation with local "authorities."
The French Auchan Group is one of the 1223 multinational corporations still operating in russia, according to the 40th issue of the weekly digest on impact of foreign companies’ exit on rf economy by the Kyiv School of Economics. Not only do they help the occupiers with "humanitarian aid" but also pay taxes to the russia's treasury, which then funds its aggression against Ukraine.
Among the food retailers in russia is the German corporation Metro.
Mind has calculated how much tax these corporations have paid to the russian treasury and how many missiles can be purchased with this money. Experts say that the Auchan Group's taxes alone can buy enough missiles for two or three attacks like the one that took place on the night of February 16, when 36 missiles struck Ukraine.
Like there is no war
The research by The Insider, Bellingcat, and Le Monde has shattered the harmony within the Auchan Group. Auchan Ukraine asked the head office to clarify the "humanitarian support" to the occupiers. "We were shocked by the information published in the journalistic investigation about the assistance to the aggressor country's army. We immediately contacted the office in France. They denied this information. We are waiting for official communication," the retailer said in its press release.
However, the corporation already has enough grounds for complaints about its operations in the russian market. In March 2022, after the start of the full-scale invasion, the management of the French chain DIY Leroy Merlin (part of the Auchan Group) sent a letter to its russian partners announcing its intention to stay in the market, expand its range and increase supplies.
During this very period, russian troops occupied the suburbs of the Ukraine's capital and committed atrocities in Bucha, Irpin and surrounding settlements, carried out air strikes in Lutsk, Ivano-Frankivsk and Dnipro, and bombed a stadium and library in Chernigiv.
"French companies should leave the russian market," Ukrainian President Volodymyr Zelensky said in a speech to the French parliament in late March, "Renault, Auchan, Leroy Merlin and others. They must stop being sponsors for the russian war machine. Sponsors of the murder of children and women. Sponsors of rape, robbery, looting by the russian army."
Zelensky impressed only Renault, which announced its withdrawal from the country on the same day, despite losses of €1 billion.
Leroy Merlin's management, like Auchan, kept an Olympic calm and did not comment on the Ukrainian president's calls. The Ukrainian office of Leroy Merlin limited itself to creating a petition against the company's work in russia, but according to sources, all those who are dissatisfied have already left their jobs. Since April 1, the company's Facebook page has not been updated, and now the website is down as well.
"The stores in russia are already unprofitable. The above-mentioned sanctions will lead to a catastrophic drop in turnover and tax payments and a high probability of bankruptcy," Auchan Ukraine said in a statement dated April 5, 2022.
Of the entire Auchan Group, only Decathlon, a sporting goods chain, closed its business in russia at the end of June last year. It had 28 stores and was the smallest among the group's other assets.
On August 24 last year, the Independence Day of Ukraine, the Auchan food chain, which, like Leroy Merlin, is part of the Auchan Group, decided to hold a campaign in support of the temporarily occupied territories. They allocated empty space on the shelves and on large posters indicated that it was intended for products from Artemsil and Chumak, as well as Kherson watermelons and even Crimean wines. "The shelves are waiting and so are we. We believe in Ukrainian Heroes," each poster read.
In russia, during the same period, the local Auchan together with the online grocery service Sbermarket, owned by Sberbank and Mail.ru, tested a new service. It allows customers to pick up previously ordered purchases in a special area in the store's parking lot. However, back in April, the Ukrainian office of Auchan assured that although the head office was not leaving the russian market, it was suspending exports and any investments. This allegedly meant that no new stores would be opened or existing ones repaired.
A war between two offices
"10,000 employees in russia will be out of work, and the sanctions imposed by the civilized world in response to aggression should affect the country's leadership and economy, not the population," was how Metro AG, headquartered in Düsseldorf, Germany, explained its desire to continue operating in the russian market back in March 2022. At the time, few believed that Ukrainians were capable of successfully defending the country and de-occupying the occupied territories. However, even now Metro AG has not changed its position.
The Ukrainian office of Metro Ukraine has publicly appealed to the parent company several times to close its business in russia. So far, however, this has not yielded any results.
"We clearly expressed our attitude to this at the beginning of the full-scale invasion in the public sphere, and our demand to close the METRO AG business in russia remains unchanged," says Metro Ukraine CEO Olena Vdovychenko. "We have once again asked our headquarters to explain and argue our position on continuing to do business in russia in the context of yesterday's tragedy in Dnipro." They have not yet received a response.
According to Vdovychenko, the chain provides humanitarian aid to the Armed Forces of Ukraine, the Territorial Defence units, volunteer organisations, hospitals, training facilities for soldiers, and animal shelters. International companies usually cannot help the armed forces of another country, as it is stipulated in their corporate standards.
On February 9, the russian outlet, Moscow Times, published a "quote" by Metro AG CEO Steffen Greubel: "We want to stay on the russian market". But the Ukrainian office denied these words. There is no such statement on the official Linkedin pages of Metro AG or Steffen Groebel himself.
At the same time, Metro AG's quarterly financial results report, published on February 8, 2023, shows a drop in sales in the chain's russian stores. "Sales in local currency decreased by 14.1% in the first quarter of fiscal year 2022-2023. The russian war in Ukraine and the related reluctance to buy goods had a negative impact. Adjusted EBITDA in russia decreased to EUR 60 million (EUR 81 million in the first quarter of 2021/2022)," the document says.
How business finances the war
Governments do not prohibit their companies from operating in the russian market because they "do not violate any law," says Igor Burakovsky, director of the Institute for Economic Research and Policy Consulting. "Of course, it is immoral to make money in russia during the war. And this is not the first time in history when business on blood has been practised. For example, the USSR traded with Germany during World War II," he says.
The director of a Ukrainian chain of building stores told Mind on condition of anonymity that the share of the Ukrainian market in the Leroy Merlin chain is at the level of statistical error. Currently, there are only two outlets in Ukraine, while there are 112 in russia. "And sales in the russian market are very significant for the company, so they would rather close in Ukraine than leave russia," he says.
As for Metro AG, the chain in russia operates 93 shopping malls in 51 regions of the country and in the 2020/2021 fiscal year (October 2020 – September 2021) its sales amounted to 2.4 billion euros. This is about a tenth of the group's sales worldwide. Against this background, the Ukrainian division also looks much more modest: €790 million in FY 2020/2021 (23 stores).
International companies pay taxes to the russian budget, and these funds are used for the war with Ukraine. In the state budget for 2023, which was signed by vladimir putin, spending on the army, special services and police this year will exceed 9 trillion rubles ($143 billion). This is more than 30% of the entire russian budget.
How much do grocery chains pay to the russian budget?
These figures are not officially published by the companies themselves. However, according to the estimates by Oleksandr Parashchiy, head of analytics at Concorde Capital, which he made at the request of Mind, in 2022 Auchan could pay €99 million, Leroy Merlin €266 million, and Metro €93 million in taxes to the russian budget. In total, this amounts to 458 million euros.
Andriy Ryzhenko, an expert at the Centre for Defense Strategies, says the cost of producing one Kalibr or X-101/555 missile, which russia is using to target Ukraine, is about 1 million euros on average. And given that, on average, during massive shelling, russians fire over a hundred missiles each time, the taxes paid to the russian budget by local subsidiaries of global retail chains will be enough for 4-5 air attacks.
By the way, Auchan Group and Metro AG are not the largest international corporations that pay taxes to the russian budget. In total, as of February 12, KSE identified about 3079 foreign companies, organisations and their brands (about 40% of them are public). For almost 1400 public groups of companies, KSE also identified their operating business in russia and updated the data for 2021. This made it possible to calculate taxes paid, among other things. Their total amount is about $24.4 billion. This money is enough for about 24,000 missiles.
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