Can business blockades and sanctions pressure Putin by crippling Russia’s economy?

Judy Woodruff:

And let's focus now on the international effort to pressure President Vladimir Putin by crippling Russia's economy.

Even before the U.S. moved today to sever normal trade with Russia, sanctions were far-reaching, and the ruble's value has plunged as a result. One new estimate suggested that the Russian economy may fall so steeply this year, it will wipe out growth from the last two decades.

And, each day, more companies and multinationals are walking away from doing business there, more than 300 already.

Amna Nawaz reports.

Amna Nawaz:

In a Cabinet meeting yesterday, President Vladimir Putin said he backed a plan to seize the assets of Western companies breaking ties with Russia over its invasion of Ukraine.

Vladimir Putin, Russian President (through translator):

We need to act decisively here, and in no cases allow any damage to local suppliers, the Russian suppliers of components and materials. It's necessary … to introduce external management and then transfer these enterprises to those who want to work.

Amna Nawaz:

In Moscow, shoppers lined up outside Ikea after news broke the company will temporarily halt operations in Russia.

Alexandr Konstantinov, Ikea Customer (through translator):

We did not get what we planned, because nothing is left.

Amna Nawaz:

Other major retailers, including Nike, H&M, Levi's, and Adidas, have also paused sales. On Tuesday, McDonald's, which employs 62,000 people in Russia, announced it would close 850 restaurants.

Paul Musgrave, University of Massachusetts-Amherst: There is going to be a little bit of a noticeable hit to McDonald's' bottom line.

Amna Nawaz:

Paul Musgrave is an assistant professor of political science at the University Of Massachusetts-Amherst.

Paul Musgrave:

International business accounts for more than half of McDonald's corporate revenue. Russia is a smaller part of that, but it is a real part of it. So there is a real hit.

Amna Nawaz:

Starbucks and Coca-Cola also announced Tuesday that business would be suspended. In a statement, the Coca-Cola company wrote — quote — "Our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine."

Two of the world's largest logistic companies, U.S.-based shipping giants FedEx and UPS, have halted delivery service. Tech companies, too, are cutting ties. Spotify closed its office in Russia indefinitely. Apple and Microsoft ceased all sales, including game consoles and cell phones, a move already felt by shoppers in Moscow.

Nikita, Moscow Resident (through translator):

I am so used to having my Apple laptop, phone, ear buds, and watch. I enjoy that my gadgets can give me advice and tell me how I feel. If I lose it all, I will be very disappointed.

Amna Nawaz:

Options for entertainment, too, are waning. Netflix has suspended its streaming service in Russia. Warner Bros., Sony Pictures, and Disney all have paused movie releases.

And as part of a larger move to isolate Russia financially, Visa, American Express, and Mastercard have all halted operations.

For a closer look on all of this, I'm joined by Jeffrey Sonnenfeld of the Yale School of Management. He keeps a public list of these companies, and has been speaking with some of the companies about the decision to withdraw from Russia.

Jeffrey Sonnenfeld, welcome to the "NewsHour." Thanks for making the time.

So that list keeps growing, right, of companies breaking operations, suspending operations. You and your team are keeping track over 300 so far, I believe.

But tell me, how big of an impact is all of this having, or could all this have on the ground in Russia?

Jeffrey Sonnenfeld, Yale School of Management: Hi, Amna. Thank you very much.

Yes, it's having an enormous impact already, is that these voluntary business blockades, matched with governmental sanctions on certain key industries, finance and transportation, have worked to help slow up this economy, if not bring it to a complete standstill.

Already, we're seeing inflation approaching 30 percent. We're seeing the Russian ruble has plunged in value by 80 percent or so. It's unheard of. We saw this happen with South Africa when we had this a great cooperation between business and government, although then, like now, there are no government officials encouraging this or asking for it or pleading for it.

There are no mandates. It's voluntary. But Bishop Desmond Tutu, great civil rights leader in South Africa, had told me back at that time, in the late 1980s, when business leaders did it then, how important it was that we bring this economy to a standstill, to freeze civil society, the way Gandhi did in India, the way the protesters did in Romania to bring down Nicolae Ceausescu or Erich Honecker in East Germany.

It is — it shows that a tyrant is not an effective totalitarian across all sectors. And that way, rather than through bloody warfare to take down a despot, you can hopefully do it this way.

Amna Nawaz:

What about this new threat of nationalization from the Russian regime? How does this change the landscape or change the calculus for companies?

Jeffrey Sonnenfeld:

Well, it's got companies really confused, because they don't know if those who stayed are somehow going to be immune from these threats, or if Putin's going to just try to expropriate all Western companies.

But it's going to paralyze Russia even further, because you have places like, I don't know, McDonald's or IBM, who've shuttered their operations, who are still paying their work forces and still wanted to maintain good relations with the Russian citizenry. And that's what had the consumer products firms reluctant to move at all.

They thought, in this — they would — many of them were symbols of liberation and freedom, like Levi's and Starbucks, McDonald's, Pepsico, and Coke, that people in Russia in 1990 onward thought, well, these were a link to the — from the East and the West and pulling us together in a world of harmony. That world, sadly, is gone.

But we don't know what the ripple effect is going to be of these expropriation threats. But it could make — it will probably make them even just more of a pariah. Even China, despite equivocating public statements, has refused to send credit in to any of these any of these establishments in Russia.

Amna Nawaz:

You know, we have seen companies take a stand like this before. You have been involved in these when it comes to voting rights or to gun control.

But the scope of the companies involved, the mix of the companies, as you mentioned, is really something different here. Why was it so different this time around? What made the difference?

Jeffrey Sonnenfeld:

The scope and speed is remarkable.

You can see in all the national surveys that 75 percent, 80 percent of the American public want these companies to do this and want us all to do more, that there's there's no gray area. A lot of times, business leaders are not just problem-solvers, but they're always looking for that third solution, that a middle ground, that they're somehow we have issues that are black and white, we're going to wrestle with the gray.

There's no middle ground here. You have a vicious villain, and you have these innocent victims. And that sort of upsets the mind-set of a lot of business leaders to get there, but they're getting there quickly.

Amna Nawaz:

There are some who argue that this is beyond the scope of corporate duty, right, that this is beyond just a business primary interest.

So when you're telling anyone who's reluctant or hesitant why they should join this list, what do you say?

Jeffrey Sonnenfeld:

I say that this is a critical issue. It's a top priority.

Sure, there's a whole host of humanitarian and social justice and human rights issues that cover the world. and can we address them all? That slippery slope argument is the cowardly excuse for inaction used in any action, any moral crusade. Bombing children's hospitals is an exception. Mowing down refugees fleeing supposedly in the midst of a cease-fire, being machine-gunned down, innocent civilians, unarmed, that's different than all these other causes.

And then is this part of the strategic context of business? Yes, it is. every bit as much as the technology sphere, the marketing sphere, the financial sphere. The geopolitical sphere is part of the strategic context of business.

When I hear some critics, ideological critics, telling CEOs to stay in their lane, you wonder, what lane are they talking about, the breakdown lane? Of course, this is part of what a CEO has to focus on.

In the 1840s, de Tocqueville visited this country, the great political scientist. He said, what makes this country different isn't just the legal system. It's the foundation of public trust, which he called social capital as — he coined that term way back then — as important as financial capital.

And that's what we have here, the fortification of social capital. We have to believe our systems work, that it's safe and fair for the free markets to work. So, of course, it's in the interests of business, their corporate reputations and, of course, the trust in our systems.

Amna Nawaz:

That is Jeffrey Sonnenfeld of the Yale School of Management joining us tonight.

Thank you so much for your time.

Jeffrey Sonnenfeld:

Thank you.