A Year Since the Ukraine Invasion, Business In Russia Remains Largely as Normal

The world has just passed the one-year mark since Russia invaded Ukraine.

On Feb. 24, 2022, Russia started this conflagration that still reaps despair, destruction and death. To most Western onlookers, the war seems just savage and utterly unnecessary.

Western hotel companies are still present in Russia, their flags above the doors of hotels whether they are actively involved or not. This is because either a specific property is a franchise or the contracts have been canceled but they are hopeless to stop the owners branding their hotel with a Western banner.

Most Western hotel companies have said something along the lines of “we have closed our Russian offices and we will not sign new development deals in the country, but also we will not abandon the employees who work in those hotels, whether they are employed directly by us or by Russian management and franchise companies.”

Last week, Norwegian family office Wenaasgruppen exited Russia and sold all its 10 hotels there to Cosmos, one of Russia’s largest hotel groups.

What’s interesting is that Radisson Hotels manages nine of the hotels the Norwegian group sold.

Perhaps a Western hotel company could justify involvement by saying profits from Russian hotels will exit the country — in this case to Norway — a step removed from money staying in a country largely condemned by the world.

It is alarming that the official statement of the deal from Sistema, Cosmos’s parent firm, said the final agreement included “a voluntary contribution to the Russian budget, which was one of the conditions for securing permission for the exit from the Russian authorities.”

Let’s assume Wenaasgruppen saw this as a necessary evil to get out of Russia. Let us also assume they began talks on the hotels a year ago when the war first started.

I have contacted the group but have so far heard nothing back.

This “voluntary contribution,” I also assume, is not normal taxes paid on any monetary transaction, so the use of such ambiguous wording is worrying. For what will that contribution be used?

Also, will Radisson seek to remove its flags from those nine hotels now that the hotels are Russian-owned? Perhaps not, if it sticks with its policy to not abandon the employees of those hotels.

Maybe Cosmos will seek new hotel brands, perhaps Russian ones?

Other Western companies continue to be active in or with Russia. Recently, Nobu Hospitality announced a development on Al Marjan Island, Ras al Khaimah, United Arab Emirates, with a developer named Enevoria Development. Website Marjan Properties says the company was “registered in Dubai in 2022 [and] created specifically for development of the outstanding projects in the Middle East as a part of Vos’hod group of companies.”

Meanwhile, Russian news agency TASS reports “Russian developer Vos’hod plans to build a Nobu chain hotel in the UAE” and “Enevoria Development is acting as the project investor.”

It makes economic and administrative sense to have an office in the jurisdiction where one intends to develop, so I guess this is a question of what sanctions mean and who must abide by them.

I did not see any questions posed online about any of this.

Maybe I am reading the situation wrongly and am barking up the wrong, missile-damaged tree, utterly nonsensical and naive about the real world. I did see plenty of online coverage that just copied and pasted the news release as though nothing unusual therein lied.

According to a report from Politico, as of January, “less than 9% of about 1,400 European Union and G7 companies that had subsidiaries in Russia before Moscow invaded Ukraine had divested at least one subsidiary in the country by November 2022.”

The report added “U.S.-based companies accounted for more exits (under 18%) than those based in the EU (8.3%) and Japan (15%).”

The argument could be that Russia is a direct neighbor of Europe, and the UAE is dependent on energy from Russia, even if the level of imports has dropped.

I certainly do not place myself as an arbiter of ethical argument, but I shall continue keeping an eye on things.

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.

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