DW: Is Kazakhstan misleading world on firms fleeing Russia?
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WORLD  30 March 2023 - 02:01

More than 20 foreign firms that fled Russia after its invasion of Ukraine relocated to Kazakhstan, authorities in Astana claim. DW reached out to some of those companies to find out the credibility of these assertions. Caliber.Az reprints the article.

Right after its invasion of Ukraine in February 2022, Russia faced a mass exodus of foreign companies. Some were leaving in fear of possible reputational loss, others due to sanctions imposed on the Kremlin by the West and some to mark their protest against Moscow's aggression.

The exits were viewed as an opportunity by Russia's neighbor Kazakhstan. In March 2022, barely a month after the invasion, Astana started negotiations with 362 foreign multinationals which had publicly announced their plans to cease or suspend work in Russia, said Deputy Foreign Minister Almas Aidarov at the time. In late December, the Foreign Ministry announced that over 20 foreign companies had relocated their regional offices or manufacturing from Russia to Kazakhstan.

The list included big names like US software industrial company Honeywell, Australian iron ore miner Fortescue, Japanese trading house Marubeni, Chinese-owned short-video sharing app TikTok and US ride-hailing service inDrive. DW reached out to some of the companies on the Kazakh list to ascertain Astana's claims. As it turns out, some of the firms named on the list have been present in Kazakhstan for years and are now only executing their long-planned expansion strategy, Others refused to confirm Astana's assertions, or declined to comment.

The authorities in Kazakhstan didn't respond to several requests from DW for comment.

TikTok ventures into Kazakhstan — but not via Russia

TikTok was among the first foreign firms to react to Russia's invasion of Ukraine. In March 2022, TikTok decided to suspend livestreaming and new postings for users in Russia. The reason was a law passed by the Russian parliament just a week after the invasion that imposed a jail term of up to 15 years for spreading any information about the Russian military that the authorities deemed "fake" on any platform, including social media.

"Our highest priority is the safety of our employees and our users," a TikTok spokesperson told DW, adding that the company continues to "evaluate the evolving circumstances in Russia to determine when we might fully resume our services."

As a result, TikTok was forced to lay off some of its employees in Russia. The remaining staff was offered other options, among them relocation. While TikTok refused to reveal any information on its employees' whereabouts, it said some of them had been relocated in accordance with the company's global and regional business needs.

TikTok, owned by China's ByteDance, also decided to focus on the Kazakh market, its spokesperson said. In October, the company and Kazakhstan's IT center, Astana Hub, launched a joint education project for the country's startups. Back then, Theo Bertram, TikTok’s vice president of European public policy, said the company was willing to develop business in Kazakhstan and open a representative office there, The Astana Times reported.

The TikTok spokesperson didn't specify how far the company has advanced with its plan, but stressed that it doesn't intend to relocate its Russian business to Kazakhstan.

Germany's Knauf Group: Expanding in Kazakhstan, but still in Russia

Another multinational company mentioned by the Kazakh authorities was the German manufacturer of building materials Knauf Group. The firm's name on the list is a little surprising, considering it's among a host of German firms that continue to do business in Russia despite intense public pressure. Russia contributes 10% to Knauf's global turnover.

"It's not about money for us, it's about 4,000 employees," the company's chairman Alexander Knauf told German publication Manager Magazin in October. "I know some of them for 30 years. Loyalty to these people means to me that I won't send them off into an uncertain future." He added, however, that his firm has complied with the sanctions imposed on Russia and that it had wrapped up its investment in the country and suspended trade between Russia and the European Union.

In a response to DW, Knauf Group didn't confirm the information on its relocation to Kazakhstan. However, the firm did elaborate on its plans to build a new manufacturing facility in the country — a project that was announced by Astana in late December.

"We have long been planning to expand in the south of the country. The reasons are growing demand for environment-friendly gypsum boards in Kazakhstan and the need to supply the neighboring markets like Kyrgyzstan," the company said, adding that it has been in dialogue with local authorities for a few years now. Knauf already has three production sites in Kazakhstan.

Honeywell: A plant in Kazakhstan and no business with Russia

Unlike Knauf Group, which plans to begin construction of its new facility as early as 2024, US industrial giant Honeywell already opened a plant for advanced automation and safety equipment in Kazakhstan in July. Kazakhstan's Foreign Ministry mentioned Honeywell next to Knauf on the list of foreign multinationals allegedly relocating to the country from Russia.

However, just as in the case of Knauf, Honeywell's decision to build a manufacturing unit in Kazakhstan had nothing to do with the current geopolitical tensions between Russia and the West. The plant had been planned way before Russia's invasion of Ukraine, the company said in an emailed statement. "We follow a plan of local growth there [in Kazakhstan] that we embarked on more than two decades ago," Honeywell said. "Work on our Almaty assembly facility opening began several years ago."

The plant's opening was followed by Honeywell's decision to completely shut down its businesses and operations in Russia. In response to DW's request for comment, the company confirmed it was no longer conducting any business in Russia. According to the Foreign Ministry, Honeywell is opening a regional office for Central Asia in Almaty that is set to replace the one it had closed in Moscow. The company didn't comment on this development.

Australia's Fortescue never had business in Russia

Australian green energy and resources company Fortescue is another big name on the Kazakh list. According to Kazakhstan, Fortescue closed its Moscow office and moved it to Kazakhstan. However, the company never really had an actual office in Russia. Its green energy arm, Fortescue Future Industries (FFI), only had a small team of a few people undertaking preliminary work in Russia, the company said.

"FFI will not tolerate one country invading another, and a decision was therefore made to withdraw from work in Russia," Fortescue told DW. It also pointed out that it never had any assets or investments in Russia.

On the other hand, the company has had a presence in Kazakhstan since 2019. In November, FFI and Astana agreed to jointly explore the "potential delivery of renewable energy projects and green hydrogen production in Kazakhstan."

No relocation planned for Japan's Marubeni

A similar response came from Japan's biggest trading house Marubeni, which Kazakhstan's Foreign Ministry claimed had partly relocated its representative office from Moscow. Marubeni, which has been working in Kazakhstan since 1993 with investments in some big projects, said it always looks for new projects in the country but that it was not accurate to describe its Kazakh plans as a relocation.

"It is true that since Russia's invasion of Ukraine, we have been paying more attention to Kazakhstan and Central Asian markets," the company said in an emailed statement. Marubeni also pointed out that it has been strictly complying with sanctions imposed on Russia and that it will not engage in any new Russia-related business and will "negotiate terminations of existing transactions wherever possible."

For now, Marubeni continues to be a stakeholder in Russia's Sakhalin-1 oil and gas project, by virtue of it being a part of the Tokyo-based consortium SODECO (Sakhalin Oil and Gas Development Co) which owns a 30% stake. In November, the Japanese stakeholders in Sakhalin-1, which also include Japan's government and the trading house Itochu, decided to retain their stake in the project, formerly led by Exxon Mobil. The US energy company exited the Sakhalin-1 venture in response to Russia's invasion of Ukraine. 

inDrive: Driving from Russia to Kazakhstan

Meanwhile, at least one foreign company on the list published by Astana has indeed relocated from Russia to Kazakhstan.

US ride-hailing service inDrive said in spring 2022 that it would move part of its Russian personnel to Kazakhstan. After the war in Ukraine began, Kazakh authorities approached the California-headquartered startup and offered to facilitate relocating its staff, inDrive founder Arsen Tomsky told Forbes Kazakhstan. The company ultimately moved most of its Russia-based employees to Kazakhstan, which Tomsky described as "the most suitable and stable place in the region."

The largest of inDrive's 17 offices globally will be located in Almaty, with nearly 1,000 employees working there in 2023, Tomsky told the Russian publication VC.ru.

Caliber.Az