EDITORIAL: IKEA and the Russian Jackals

EDITORIAL

IKEA and the Russian Jackals

The story of IKEA’s foolhardy entry into the Russian market is a cautionary tale for any Western business, and the moral of the story is simple:  Don’t do it!  We must confess, we take some pleasure in watching the zebra-like carcass of IKEA being ripped apart and devoured by the Russian jackals.  It’s a fate the company richly deserves for playing its part in supporting the Putin dictatorship.  Sensible consumers should buy their furniture elsewhere.

Just a few months ago, we reported on how the Kremlin was illegally preventing Ikea from opening one of its stores, forcing the layoff of 250 Russian workers.  It was an outrage, but now IKEA may feel it was lucky in that regard, because it turns out that it’s actually even more costly to actually do business in the stores it has been allowed to open.

Last week, we learned the Kremlin had cheated the Swedish firm out of nearly $200 million via gas and electricity overcharges.  IKEA responded by announcing it was shutting down all future investment in the land of Putin for the forseeable future.

There’s no gentle way of putting it:  IKEA got what it deserved.  By investing in Russia, IKEA is giving both direct and indirect support to the Putin regime, and facilitating the consolidation of totalitarian rule in Russia.  The company and its stockholders should have known better, and now they are paying a terrible price for their arrogance and ignorance.

Some people never learn.  And so we find French retail giant Carrefor ironically opening its first retail outlet in Russia even as IKEA begins to drown. Obsessed with the pathology of market share dogma, these firms will roll the dice and expand anywhere that might conveivably allow them to increase market share even marginally, heedless of both the financial and the moral risks they are taking.

19 responses to “EDITORIAL: IKEA and the Russian Jackals

  1. But there’s still a long line of western companies waiting in Putin’s hall. IKEA is but a dwarf from the Russian point of view. They could buy a dozen of IKEAs any time soon. The Russian jackals from SBERBANK has just did that trick on Opel. Funny editorial though.

    • It is fascinating how Russians convinced themselves that they bought Opel. In reality, SBERBANK is but one of many investors who now own Opel. Sberbank bought 35%, GM keeps 35%, Magna owns 20% and the German workers get a 10% stake in the company. In other words, SBERBANK is a minority shareholder among other minority shareholders. It does not even own the majority of Opel yet is claiming that it owns all of it !?! Plus, it was the Canadian company that engineered the deal (Magna) and will be effectively running Opel.

  2. we learned the Kremlin had cheated the Swedish firm out of nearly $200 million via gas and electricity overcharges

    What a vivid picture, Putin forging an electricity bill! Please, give me a phone number of your weed dealer, I want the same!

    • There is a link in the article to a Swedish source or are you too lazy to go that far?

      http://www.thelocal.se/20172/20090620/

    • Show some self-respect and respond to the link Ditt0.

      • I’ve already done that, not to mention other sources. But what do you want me to do? To say there’s no curruption in Russia? It’s overwhelming. However, it’s a simplification (if not idiocy) to think that all the cash flows from corruption are Kremlin-controlled. If it were that simple, the situation would be very easy to amend. Which is obviously not the case. In fact, I often work with federal and regional authorities, and I have to say, with all due responsibility, that the overall degree of corruption and/or incompetence is several times higher at the regional level, which is often out of effective federal control (incorpotation of ‘Fatherland – All Russia” bloc, a party packed with the most (in)famous corrupt regional personalities, into the ‘United Russia’ in 2003 is the best sign of helplessness of central authorities in the face of local corruption. It’s just an emblem of Kremlin’s weakness in that).
        My point is that IKEA’s issue has nothiong to do with Kremlin at all.

  3. Carre-for? :-)))

  4. It looks like rts’s has activated a new sockpuppet with Mr. Jack.

  5. From Bloomberg on why Russia is a bad investment back in December:

    The oil and gas industry isn’t the only target. Ikea has been embroiled in numerous disputes with Russian authorities since it started opening its familiar blue and yellow sheds in the country in March 2000. The company was once stopped from building a footbridge across a busy highway to its store because the walkway was too close to a war monument. Ikea’s founder, Ingvar Kamprad, unsuccessfully sought a meeting with Putin last year to complain about how Ikea was being treated.

    Likewise, Metro, Germany’s largest retailer, is facing criticism from Russian electronics chains for undercutting the prices of local retailers at the Media Markt outlets it has opened in Moscow.

    http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=a4EZfXCnZIXI

    A bad investment in December, worse now that the globle recession has hit with credit markets dried up and Russia has no growth or crediblity to offer outside retailers or desperately needed oil and gas service providers.

    But, then, our little army of sockpuppets here today are economically illiterate and read only each other’s troll droppings for inspiration.

  6. Soon Russia will be all alone in the world. Surrounded by imaginary enemies.

  7. Not imaginary only, but alone on the Asian Steppe waiting to die. RaSSiya will be no more.

  8. Why not forge electricity bill ! We already
    know Raz-putin forges gas bills !

  9. Stranger_in_Strange_Land

    TeliaSonera, BP, Ikea, Telenor, the de-facto inability of foreign banks to recover debts in Russia …

    Still the foreign businesses in Russia fail to unite against being fleeced by officialdom and corrupted kangaroo courts. Devided we fight and devided we fall – salami tactics.

    And still people ask if they should invest in Russia!

  10. From the Moscow Times via Bloomberg today:

    IKEA, the world’s biggest home-furnishings retailer, will halt future investment plans in Russia until “key issues” affecting operations are resolved, the company’s Russia chief said Tuesday.

    While IKEA will finish current projects, “further investments will be temporarily halted,” Per Kaufmann said in e-mailed comments. He did not specify the issues.

    IKEA has faced at least four disputes with authorities while opening 11 stores since first entering Russia in March 2000.

    “IKEA’s case shows that the investment climate in Russia hasn’t been improving,” said Mikhail Krasnoperov, an analyst at Troika Dialog.

    Of course the biggest loser is the Russian consumer that is now denied competitive prices on home furnishings.

  11. The NYT’s has an article too on IKEA’s decision to call it quits:

    MOSCOW — Ikea said Tuesday that it was suspending further investment in Russia, apparently because of pervasive corruption and demands for bribes.

    The announcement came after a rare statement by Ikea’s 83-year-old founder in a radio interview that Ikea had decided not to solve problems by slipping money under the table.

    ——

    The decision is particularly damning for Russia because Ikea runs outlets in dozens of countries around the world and is hardly thin-skinned when it comes to dealing with bureaucracies.

    http://www.nytimes.com/2009/06/24/business/global/24ruble.html?_r=1&partner=rss&emc=rss

  12. penny

    “IKEA, the world’s biggest home-furnishings retailer, will …” — bluh bluh bluh

    97% of IKEAs items are “Made in China” and around and Russia borders on China.
    If you are not a complete idiot you will get the message right.

    • If this is the case, why can’t a Russian competitor to IKEA sell the same goods? Why do Russians clamber to buy IKEA?

  13. Why it’s only Cap N Trade? The Russian Government is doing their job in saving the planet. Ikea needs to get on board and quit whining.

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