Is Kazakhstan fooling the world about companies fleeing Russia?

In the wake of the February 2022 invasion of Ukraine, Russia faced a mass exodus of foreign companies. Some left out of fear of a possible loss of reputation, others because of sanctions imposed on the Kremlin by the West, and some to mark their protest against Moscow’s aggression.

The departures were seen as an opportunity by Kazakhstan, Russia’s neighbor. In March 2022, just a month after the invasion, Astana started negotiations with 362 foreign multinationals that had publicly announced their plans to stop or suspend work in Russia, said Vice Chancellor Almas Aidarov. In late December, the Ministry of Foreign Affairs of Kazakhstan announced that more than 20 foreign companies had relocated their regional offices or manufacturing from Russia to Kazakhstan.

The list included big names like US industrial software company Honeywell, Australian iron ore miner Fortescue, Japanese trading company Marubeni, Chinese-owned short video-sharing app TikTok and US ride-sharing service inDrive. DW reached out to some of the companies on the Kazakh listing to verify Astana’s claims. It turns out that some of the companies listed have been present in Kazakhstan for years and are now just executing their long-planned expansion strategy, while others declined to confirm Astana’s claims or declined to comment.

Kazakhstani authorities did not respond to multiple DW requests for comment.

TikTok ventures into Kazakhstan – but not via Russia

TikTok was one of the first foreign companies to react to the Russian invasion of Ukraine. In March 2022, TikTok decided to suspend live streaming and new posts for users in Russia. The reason was a law passed by the Russian parliament just a week after the invasion that imposed a prison sentence of up to 15 years for anyone who disseminated any information about the Russian military that the authorities considered “false” on any platform, including social media.

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

As a result, TikTok was forced to lay off some of its employees in Russia. The rest of the team were offered other options, including relocation. While TikTok declined to reveal any information about the whereabouts of its employees, it said that some of them have been relocated in line with the company’s global and regional business needs.

TikTok, owned by China’s ByteDance, has also decided to focus on the Kazakh market, its spokesman said. In October, the company and Kazakhstan’s IT hub AstanaHub launched a joint education project for the country’s startups. At that time, 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 time reported.

TikTok’s spokesperson did not specify how far the company is with its plan, but stressed that it does not intend to relocate its Russian business to Kazakhstan.

Germany’s Knauf Group is expanding in Kazakhstan but staying in Russia

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

“It’s not about the money for us, it’s about 4,000 employees,” company chairman Alexander Knauf told German publication Manager Magazin in October. “I’ve known some of them for 30 years. Loyalty to these people means to me that I won’t send them into an uncertain future.” He, however, added that his company complies with sanctions imposed on Russia and that it has ended its investments in the country and suspended trade between Russia and the EU.

In response to DW, Knauf Group has not confirmed information about its move to Kazakhstan. However, the company has elaborated on its plans to build a new factory in the country – a project announced by Astana in late December.

“We have long planned to expand in the south of the country. The reasons are the growing demand for eco-friendly plasterboard in Kazakhstan and the need to supply neighboring markets like Kyrgyzstan,” the company said, adding that it is in dialogue with local authorities. already a few years ago. Knauf already has three production sites in Kazakhstan.

Honeywell: A factory in Kazakhstan and no business with Russia

Unlike the Knauf Group, which plans to start building its new facilities as early as 2024, US industrial giant Honeywell opened a factory for advanced automation and security equipment in Kazakhstan in July. Kazakhstan’s Ministry of Foreign Affairs named Honeywell alongside Knauf on the list of foreign multinationals reportedly moving into the country from Russia.

However, as with the German company, Honeywell’s decision to build a manufacturing facility in Kazakhstan had nothing to do with current geopolitical tensions between Russia and the West. The factory had been planned long before Russia’s invasion of Ukraine, the company said in an emailed statement. “We follow a local growth plan there [in Kazakhstan] that we embarked on more than two decades ago,” Honeywell said. “Work on opening our Almaty assembly facility began several years ago,” he added.

The factory opening was followed by Honeywell’s decision completely shut down its business and operations in Russia. In response to DW’s request for comment, the company confirmed that it was no longer conducting business in Russia. According to Kazakhstan’s Ministry of Foreign Affairs, Honeywell is opening a regional office for Central Asia in Almaty, which is expected to replace the one it closed in Moscow. The company did not comment on this.

Australian Fortescue has never had business in Russia

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

“The FFI will not tolerate one country encroaching on another and therefore the decision was made to withdraw from work in Russia,” Fortescue told DW. He also highlighted that he never had assets or investments in Russia.

On the other hand, the company has been present 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”.

Japan’s Marubeni says no relocation is planned

A similar response came from Japan’s largest trading house, Marubeni, which Kazakhstan’s Ministry of Foreign Affairs claimed had partially relocated its representative office from Moscow. Marubeni, which has been working in Kazakhstan since 1993 with investments in some big projects, said it was always looking for new projects in the country, but it would not be accurate to describe its Kazakh plans as relocation.

“It is true that since Russia’s invasion of Ukraine, we have been paying more attention to Kazakhstan and Central Asia markets,” the company said in an emailed statement. Marubeni also highlighted that it has been strictly complying with the sanctions imposed on Russia and that it will not get involved in any new business related to Russia and will “negotiate the termination of existing transactions whenever possible”.

For the time being, Marubeni remains one of the interested parties in Russia’s Sakhalin-1 by virtue of being part of the Tokyo-based SODECO (Sakhalin Oil and Gas Development Co) consortium, which has a 30% stake in the project. Petroleum. In November, Japanese stakeholders in Sakhalin-1, which also include the government of Japan and trading company Itochu, decided to maintain their stake in the project, previously led by Exxon Mobil. The US energy company pulled out of the Sakhalin-1 venture in response to the Russian invasion of Ukraine.

InDrive: Driving from Russia to Kazakhstan

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

US ride-hailing service inDrive said in spring 2022 that it would transfer some of its Russian staff to Kazakhstan. After the war in Ukraine broke out, Kazakh authorities approached the California-based startup and offered to facilitate the relocation of its staff, inDrive founder Arsen Tomsky told Forbes Kazakhstan. The company ended up moving 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 by 2023, Tomsky told Russian publication VC.ru.

Edited by: Ashutosh Pandey

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