Why Cargill and General Mills Are Still Doing Business in Russia
The United States’ sanctions on Russia are unprecedented and far-reaching. Until now, there has never been such a comprehensive set of sanctions placed against a country as large and as integrated into global supply chains as Russia, according to officials with the U.S. Department of Commerce.
Everyone has felt the effect of said sanctions, but some businesses are still able to operate at limited capacity in Russia, particularly U.S. food and agriculture companies, Minnesota-based Cargill Inc. and General Mills Inc. included.
This was addressed during an April 28 webinar held by the Minnesota Trade Office in cooperation with the U.S. Department of Commerce, U.S. Department of the Treasury, Office of Foreign Assets Control, and Bureau of Industry and Security.
Ukrainian residents of Minnesota remain concerned about why companies in their home state are continuing to conduct business in Russia.
In response to questions about if Cargill and General Mills can continue operations in Russia, Priyanka Renugopalakrishnan, enforcement officer for the U.S. Department of the Treasury and the Office of Foreign Assets Control (OFAC), said general licenses do allow for business in agriculture and medicine. It was an area she said she couldn’t address at length in an open venue, noting OFAC is in the process of implementing as many sanctions as possible without affecting humanitarian or agricultural matters.
“We realize the concerns that citizens have in this country as well as in Ukraine,” she said.
Cargill last addressed its operations in Russia in a March 30 statement, announcing it had cut back to only operating essential food and feed facilities.
“This region plays a significant role in our global food system and is a critical source for key ingredients in basic staples like bread, infant formula, and cereal. Food is a basic human right and should never be used as a weapon,” the statement reads.
Cargill committed to contributing any profits activities in Russia to humanitarian aid and set a minimum donation amount of $25 million to support the Ukrainian and humanitarian efforts in the region. The company is also contributing to the World Food Programme, World Central Kitchen, Red Cross, Save the Children, European Food Banks Federation, and local relief organizations supported by employee-led Cargill Cares Councils in Ukraine, at borders and in neighboring countries.
General Mills has a joint venture with Nestle called Cereal Partners Worldwide with sales in Russia representing less than 1 percent of total General Mills sales, according to a company statement. In partnership with Nestle, General Mills has stopped advertising and suspended all capital investment in its CPW business in Russia.
Like Cargill, Nestle called some of Cereal Partners Worldwide operations essential in a statement: “As the war rages in Ukraine, our activities in Russia will focus on providing essential food, such as infant food and medical/hospital nutrition — not on making a profit. This approach is in line with our purpose and values. It upholds the principle of ensuring the basic right to food.”
While Nestle says CPW does not expect to make a profit in the country or pay any related taxes for the foreseeable future in Russia, the company pledged to donate any profit made to humanitarian relief organizations.
Two weeks is the longest stretch of time the U.S. has gone without placing further sanctions or adjusting existing ones since the conflict began, said Matthew Edwards, director of the Office of Russia, Ukraine, and Eurasia, International Trade Administration for the U.S. Department of Commerce. He used this as an example of why it has been particularly challenging for companies to navigate business conducted in Russia.
“The main point that I am going to make here is just that it’s a very fluid environment,” Edwards said.
Despite a deteriorating bilateral relationship spanning multiple years, Russia was still a top 40 market for U.S. exports in 2021, accounting for more than $6.5 billion in U.S. exports. U.S. exports to Ukraine have also grown over the past years, doubling since 2015 to a total of about $2.5 billion per year.
He encouraged anyone conducting businesses in Russia to continue checking back on what is or is not allowed.
“A lot of information on individual sanctions, it’s perishable, it’s subject to change,” Edwards said. “A transaction that may have been safe four weeks ago might be sanctioned today. A transaction that is safe today could possibly fall under additional restrictions in another week, in another month. It’s difficult to predict. A lot depends on the situation on the ground in Ukraine.”