Playing Russian roulette with food security
By Dr. Sylvain CharleboisBusiness Operations Editor pick food security Maple Leaf Foods McCain Foods Russian invasion
With war comes economic sanctions. Instead of sending troops to fight the old-fashioned way, wars are fought with money, literally, and the invasion of Ukraine by Russia is no exception. The United States, the United Kingdom, Australia, Japan, the European Union, Turkey, and a few more countries have sanctioned Russia, in one way or another. Canada has targeted the banking system, barred Russian airlines from using its airspace, canceled all existing export permits and halted new ones, which primarily affects the aerospace industry. Nobody knows for sure if these sanctions will work, but both the energy and food sectors have been spared so far by all sanctioning nations.
Sanctions are designed to affect Putin’s regime, not Russia’s people, recognizing that many Russians may not even be supportive of the invasion of Ukraine. Corporations are also potentially affected, as some Canadian companies in the food sector have indeed invested in Russia over the years. In the United States, Coca-Cola, McDonald’s and Starbucks have now pulled out of Russia.
From Canada, McCain which was building a $200-million plant in the Russian Tula region opted to halt its construction for now. The company may decide to pull its project out of Russia in the days to come. But it’s been reported that McCain is still conducting business in Russia. Meanwhile, McCain has announced that they would donate $200,000 for relief efforts in Ukraine, making clear that it condemns Putin’s actions against Ukraine. Maple Leaf Foods, on the other hand, which does not have any operations in Russia, has opted to give $500,000 in relief funds to help Ukrainians. Good on them.
Convenience store giant Alimentation Couche-Tard also operates many stores in Russia and could be affected by sanctions. The company just announced it was suspending operations in Russia. The company which controls the Circle K chain, only has 38 stores and more than 320 employees in Russia. It was present in Russia by way of Norway’s Statoil Fuel and Retail. Some Canadians here at home have made calls for a boycott of Mac’s and Circle K stores operated by Alimentation Couche-Tard until the Laval-based company made a clear decision to cease its operations in Russia. That is likely why it did. The company also donated US$1.5-million to the Red Cross in recent days.
Another major Canadian food player in Russia is Restaurant Brands International, Tim Hortons’ parent company. It also owns Burger King, and the chain operates 800 stores in Russia. Other than a corporate statement registering concerns about the invasion, no clear decision has been made. In recent days, many took to social media to ask the chain to stop conducting business in Russia.
Asking these companies to pull out and stop doing business with Russia is the easiest and most obvious thing to do. The atrocity of the invasion is simply inexcusable. But we also need to keep in mind that these Canadian companies are very much part of Russia’s food security fabric for the Russian people. On the surface, closing convenience stores or fast food joints or not selling French fries could be seen as trivial. But any corporate decision to pull out or to cease doing business in the country would compromise Russia’s access to food, thus penalizing its people. It’s truly a delicate balancing act between reputational risks and food security. The stakes are different when compared with other economic sectors.
Last week, Prime Minister Trudeau was vague and non-committal regarding whether his government would compensate Canadian companies hurt by sanctions imposed on Russia. To compensate companies conducting business abroad affected by war-time sanctions would set a very dangerous precedent. To be crystal clear, Ottawa should not compensate Canadian companies hurt by sanctions imposed on Russia, including companies in the agri-food sector. The reality is this: geopolitical risks are always in the mix when investing abroad. It was these companies, not the Canadian people, who took on these risks when they opted to invest in Russia.
Moreover, many of these companies would have insurance and proper coverage against such sanctions. And in case Canadians were not aware, sanctions against Russia started more than eight years ago when Russia invaded Crimea. Our Canadian companies should not be surprised by how things are unfolding, and Canadian taxpayers should not be on the hook for this.
Dr. Sylvain Charlebois is professor and senior director, Agri-food Analytics Lab, Dalhousie University.
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