The invasion of Ukraine by Russian military forces has shocked the global community, and prompted perhaps the largest package of sanctions ever assembled in such a short space of time. If Vladimir Putin was betting on western disunity, he must by now be ruing it as a fool’s bet, as his country faces economic ruin and diplomatic and financial isolation for many years – even decades – to come.
But his bet wasn’t that foolish, on the strength of the evidence. The West has spent the last 30 years championing global capitalism and aggressive individualism, and that has resulted in very large numbers of companies that didn’t have so much as a clerk’s desk behind the Iron Curtain now having a significant footprint throughout the former USSR. The Russian Federation seemed to be playing ball, after all. Putin may have rationally calculated that western companies’ exposure to markets under authoritarian control is so high that meaningful sanctions would be impossible to agree. Indeed, there was a whiff of it when Italy’s Mario Draghi disgracefully campaigned for (and won) a carve-out for luxury goods.
Thus disentangling from the world’s 11th largest economy is not straightforward, but it is possible. BP, which spent 30 years building up its business in Russia, decided within four days of the invasion that a full withdrawal from Russia would be necessary including ditching its stake in Rosneft, the state-backed Russian oil major. It is expected that it will suffer a write-down of around £25bn for having done so. Apple has stopped selling iPhones there. ASOS has stopped selling clothes there. Visa and Mastercard have cut Russia out of their networks. Just this morning, the London Stock Exchange suspended trading in 27 firms with links to Russia. Even Harley Davidson does not see fit to sell motorcycles there any longer. Those are just a few to name, and many more will follow as the atrocities inevitably worsen.
So where is the UK accountancy sector on this? Yesterday Accountancy Today asked the Big Four and the two major professional bodies a series of questions about their response to the crisis. They offered various platitudes about sympathy for the Ukrainian people, and the need to ensure the safety of their employees in the region. None of which was what we had asked them, with respect. What we asked was whether they intended to cut ties by closing any of their Russian operations, and whether they would forthwith refuse to work with, for example, any Russian government entities. None provided direct answers to those particular questions. At best, we were told that sanctions compliance would be a priority, as if this were altruistic.
Sympathy with Ukrainians is the easy bit – we all have that. It costs nothing and does not require any moral leadership. The harder bit, the bit where specifically the Big Four but really every international firm could make a difference, is by withdrawing from the market altogether. If Burberry isn’t providing trenchcoats to Putin’s soldiers, then Britain’s accountancy firms shouldn’t be doing the books for his government, his cronies, or any business that pays tax into his war machine. It really is as simple as that.
The business case for leaving is strong on its own: the Russian economy will lie in ruins within months, as the rouble plummets by almost a third, Russian stocks lose 90% of their value, and Russian banks have hundreds of billions of dollars in foreign reserves frozen by sanctions. This is not merely choppy economic water that will all settle down again within a couple of years like Covid or 2008. The world’s 11th largest economy has gone rogue, taking actions that have already wrought irreparable damage to the post-war security order, rattling the nuclear sabre, and prompting once-reticent Germany to spend 100 billion euros rearming. Does anyone imagine this will be a good place to have clients 18 months from now? Can we not work a bit harder and replace roubles with naira or rupees, if some 2-5% contraction in revenue is so intolerable?
If the business case is compelling, the moral case is inarguable. The largest armed conflict in Europe since 1939 started by one aggressor, dozens of submissions of evidence of war crimes to the International Criminal Court just one week into the war, including the use of cluster munitions in civilian areas that have already killed children; what is it going to take for our top firms to walk away from fee income generated in this violent pariah state? Or will the profession take the shilling from just about any market, no matter what the host state is up to, including firing thermobaric weapons at hospitals? A bung to the Red Cross, absolutely, but otherwise these contracts are far too valuable to terminate, you understand.
I shall caveat this heavily to say that there is evidence that some firms will take a lead on this. Grant Thornton is a highly honourable example – on Tuesday night, it became the first accountancy firm (to our knowledge) to take clear action, revealing it had severed ties with FBK, the Grant Thornton member firm in Russia. “Like many international organisations around the world, we will continue to evaluate what further actions are needed as the situation evolves,” it said in a statement. Accountancy Today will be creating a regularly updated list of accountancy firms which have seized the initiative and are taking positive action before government sanctions require them to do so.
If the Big Four are already planning to withdraw in full: bravo, though they didn’t say so when we gave them the opportunity. I invite them to offer such a clarification. I further invite them to consult the Navalny List of 35 – the catalogue of kleptokrats and human rights abusers responsible for the poisoning and incarceration of Putin’s only serious opposition, Alexei Navalny – and declare that, should any of those people be on the books right now, they will be off the client roster by the end of the month. Along with any state organisations or structures under Putin’s control. And all the oligarchs. A ground invasion of a peaceful, sovereign European country in 2022 – if you’ll do business with the man who makes that sentence possible or any of his friends, you’ll do business with anyone.
It’s time for our sector’s leading lights to show what leadership actually means, at a time when it really should mean something, and withdraw their services from the new North Korea. The partnership can tolerate a dent in their earnings in 2022, and spend their still handsomely remunerated time lining up new opportunities with clean consciences. There is no other morally respectable path.