Academic Fight Erupts Over Measuring the West’s Pressure on Russian Economy

Yale’s Chief Executive Leadership Institute first began publishing estimates of how many major multinational companies are pulling back from Russia in February 2022, just days after the war began, and have updated them continuously. Its latest figures are that as of this week “over 1,000 companies have curtailed operations in Russia,” in what it has called an “exodus.”

In January,

Simon Evenett,

a professor at the University of St. Gallen, and

Niccolò Pisani,

a professor at the International Institute for Management Development, both in Switzerland, posted a paper online headlined “Less than nine percent of Western firms have divested from Russia.” An early version of their working paper from October said it “reassessed” the Yale initiative and that its fact-checking showed: “This does not amount to a Western corporate ‘retreat’ from Russia, let alone an ‘exodus.’ ”

The Yale group responded by accusing the Swiss researchers of using “fabricated” data and peddling misinformation that has fueled Russian propaganda. The Swiss then sent letters from a lawyer defending their methodology, saying the Yale group had made remarks that were “strongly defamatory and insulting,” and demanding that they “cease and desist.” 

At the heart of the matter is a dispute over how to define several concepts: What is a Western business? What is an exit from Russia?

The Yale results focus primarily on global multinational corporations with Russian operations and at least $100 million in global revenue, producing a list largely of companies that are household names. They grade those companies from A (totally halted Russian engagement or completely exited Russia) to F (continuing business as usual in Russia). 

The Swiss researchers use a different approach. They identify Russian subsidiaries of Western companies in Orbis, a giant database of corporate information, then research whether divestment of the subsidiary occurred.

This might sound like the same thing, but it isn’t. The Yale researchers didn’t limit their search to companies with equity stakes in Russia; they also included those with significant trading, licensing, franchising or other business activities in Russia. By contrast, the Swiss researchers restricted themselves to companies with an equity stake. In part that is because of how Orbis records companies. The Swiss authors also argue that other types of relationship are easier to sever. Thus, the Swiss team wouldn’t count a Western airline that flies to Russia if it has no Russian subsidiary; the Yale team would.  

Moreover, the Swiss team looked at companies with revenue of more than $1 million, capturing many smaller, little-known firms and individuals.

In their January paper the Swiss found that using their criteria, there were 1,404 entities in Western countries—defined as the European Union, the U.S., Canada, the U.K. and Japan—that owned Russian subsidiaries, but only 120 had completed divestment of the subsidiary.

Yale dean

Jeffrey Sonnenfeld,

CELI’s founder and president, and research director

Steven Tian

said in an interview that they hadn’t exaggerated the departures and were dismayed to see Russia’s state-owned TASS news agency and Russia Today touting the Swiss study.

When they obtained the Swiss data, they said they found hundreds of entries on the list were individuals, some well-known Russian oligarchs, and companies generally identified as Russian, such as social-media company Yandex (often called Russia’s Google), petrochemical company Uralchem or Evraz, a metals conglomerate largely owned by oligarch

Roman Abramovich.

In the Orbis database, firms or individuals typically thought of as Russian might indeed have Western citizenship or domiciles, and have Russian subsidiaries. For example, Yandex has a Netherlands-based parent company: Yandex NV. Uralchem is owned by Uralchem Holding PLC in Cyprus. Evraz PLC is incorporated in the U.K. 

The Swiss list also omits Western companies that didn’t have subsidiaries in the Orbis database, but that the Yale group counts as having exited.

Daniel Treisman, an expert on Russia’s politics and economics at the University of California Los Angeles who hasn’t been involved with either research effort, said the complex incorporation practices of companies like these have vexed tax authorities for decades. He said many oligarchs have obtained citizenship or registered corporate headquarters abroad to avail themselves of Western legal systems to defend their assets, for tax benefits, to reassure investors or to improve their company’s reputations. 

“Although there is a rationale for it, it certainly seems odd to include firms like Evraz,

Rusal

and Severstal among ‘Western companies,’ ” Mr. Treisman said in an email.

The Swiss researchers acknowledge including individuals and firms typically considered Russian, but they say even if all such entries are excluded from their data, they continue to find a low share of companies that fully exited from their equity stakes in Russia. They note that their percentage of completed exits is similar to that produced by a database from the Kyiv School of Economics. (KSE, however, works closely with the Yale group and KSE economists have co-authored criticism of the Swiss methodology.)

Mr. Tian of Yale said given the imprecision of the data, “We would shy away from giving a hard percentage” of how many companies exited from Russia. “It presumes a level of certainty and clarity which just isn’t there,” he said, which is why Yale has focused on the number of major Western firms leaving and severing both equity and nonequity ties.

Setting aside the acrimony, some concrete takeaways are possible. 

First, many large Western companies really have completely withdrawn from Russia, taking investment, know-how and jobs. 

Second, equity ownership is only part of the picture. Hundreds more Western companies severed partnerships, stopped importing to or exporting from Russia, or otherwise ended their business there. “It can be a meaningful action for sure,” Mr. Pisani said in an email, referring to companies without equity stakes that severed their ties.

Third, after decades in which Russia became part of the global trade and investment system, many Russian individuals and companies became deeply entangled with the West. It resulted in a bizarre situation where some of Russia’s most recognizable companies are, on paper, held in the West. It is also true that much international business activity flies under the radar—there really are hundreds of obscure wholesalers and little-known firms that have quietly stayed put as brand-name multinationals leave. By any count, hundreds of firms continue to do business with Russia, ignoring the pressure to depart.

Write to Josh Zumbrun at josh.zumbrun@wsj.com

Yale’s Chief Executive Leadership Institute first began publishing estimates of how many major multinational companies are pulling back from Russia in February 2022, just days after the war began, and have updated them continuously. Its latest figures are that as of this week “over 1,000 companies have curtailed operations in Russia,” in what it has called an “exodus.”

In January,

Simon Evenett,

a professor at the University of St. Gallen, and

Niccolò Pisani,

a professor at the International Institute for Management Development, both in Switzerland, posted a paper online headlined “Less than nine percent of Western firms have divested from Russia.” An early version of their working paper from October said it “reassessed” the Yale initiative and that its fact-checking showed: “This does not amount to a Western corporate ‘retreat’ from Russia, let alone an ‘exodus.’ ”

The Yale group responded by accusing the Swiss researchers of using “fabricated” data and peddling misinformation that has fueled Russian propaganda. The Swiss then sent letters from a lawyer defending their methodology, saying the Yale group had made remarks that were “strongly defamatory and insulting,” and demanding that they “cease and desist.” 

At the heart of the matter is a dispute over how to define several concepts: What is a Western business? What is an exit from Russia?

The Yale results focus primarily on global multinational corporations with Russian operations and at least $100 million in global revenue, producing a list largely of companies that are household names. They grade those companies from A (totally halted Russian engagement or completely exited Russia) to F (continuing business as usual in Russia). 

The Swiss researchers use a different approach. They identify Russian subsidiaries of Western companies in Orbis, a giant database of corporate information, then research whether divestment of the subsidiary occurred.

This might sound like the same thing, but it isn’t. The Yale researchers didn’t limit their search to companies with equity stakes in Russia; they also included those with significant trading, licensing, franchising or other business activities in Russia. By contrast, the Swiss researchers restricted themselves to companies with an equity stake. In part that is because of how Orbis records companies. The Swiss authors also argue that other types of relationship are easier to sever. Thus, the Swiss team wouldn’t count a Western airline that flies to Russia if it has no Russian subsidiary; the Yale team would.  

Moreover, the Swiss team looked at companies with revenue of more than $1 million, capturing many smaller, little-known firms and individuals.

In their January paper the Swiss found that using their criteria, there were 1,404 entities in Western countries—defined as the European Union, the U.S., Canada, the U.K. and Japan—that owned Russian subsidiaries, but only 120 had completed divestment of the subsidiary.

Yale dean

Jeffrey Sonnenfeld,

CELI’s founder and president, and research director

Steven Tian

said in an interview that they hadn’t exaggerated the departures and were dismayed to see Russia’s state-owned TASS news agency and Russia Today touting the Swiss study.

When they obtained the Swiss data, they said they found hundreds of entries on the list were individuals, some well-known Russian oligarchs, and companies generally identified as Russian, such as social-media company Yandex (often called Russia’s Google), petrochemical company Uralchem or Evraz, a metals conglomerate largely owned by oligarch

Roman Abramovich.

In the Orbis database, firms or individuals typically thought of as Russian might indeed have Western citizenship or domiciles, and have Russian subsidiaries. For example, Yandex has a Netherlands-based parent company: Yandex NV. Uralchem is owned by Uralchem Holding PLC in Cyprus. Evraz PLC is incorporated in the U.K. 

The Swiss list also omits Western companies that didn’t have subsidiaries in the Orbis database, but that the Yale group counts as having exited.

Daniel Treisman, an expert on Russia’s politics and economics at the University of California Los Angeles who hasn’t been involved with either research effort, said the complex incorporation practices of companies like these have vexed tax authorities for decades. He said many oligarchs have obtained citizenship or registered corporate headquarters abroad to avail themselves of Western legal systems to defend their assets, for tax benefits, to reassure investors or to improve their company’s reputations. 

“Although there is a rationale for it, it certainly seems odd to include firms like Evraz,

Rusal

and Severstal among ‘Western companies,’ ” Mr. Treisman said in an email.

The Swiss researchers acknowledge including individuals and firms typically considered Russian, but they say even if all such entries are excluded from their data, they continue to find a low share of companies that fully exited from their equity stakes in Russia. They note that their percentage of completed exits is similar to that produced by a database from the Kyiv School of Economics. (KSE, however, works closely with the Yale group and KSE economists have co-authored criticism of the Swiss methodology.)

Mr. Tian of Yale said given the imprecision of the data, “We would shy away from giving a hard percentage” of how many companies exited from Russia. “It presumes a level of certainty and clarity which just isn’t there,” he said, which is why Yale has focused on the number of major Western firms leaving and severing both equity and nonequity ties.

Setting aside the acrimony, some concrete takeaways are possible. 

First, many large Western companies really have completely withdrawn from Russia, taking investment, know-how and jobs. 

Second, equity ownership is only part of the picture. Hundreds more Western companies severed partnerships, stopped importing to or exporting from Russia, or otherwise ended their business there. “It can be a meaningful action for sure,” Mr. Pisani said in an email, referring to companies without equity stakes that severed their ties.

Third, after decades in which Russia became part of the global trade and investment system, many Russian individuals and companies became deeply entangled with the West. It resulted in a bizarre situation where some of Russia’s most recognizable companies are, on paper, held in the West. It is also true that much international business activity flies under the radar—there really are hundreds of obscure wholesalers and little-known firms that have quietly stayed put as brand-name multinationals leave. By any count, hundreds of firms continue to do business with Russia, ignoring the pressure to depart.

Write to Josh Zumbrun at josh.zumbrun@wsj.com