British packaging company Mondi helps Russia survive sanctions

The British company Mondi is helping Russia weather international sanctions. The country's main packaging producer Tetra Pak left, sending shockwaves through the dairy sector. British packaging company Mondi also said it would end its ties to Russia over the invasion of Ukraine. However, it actually stayed and even doubled down on its business, helping fund the Russian War Machine. Will Mondi honor its word and leave the Russian market, or will it put greed ahead of integrity? International corporations' announcements of withdrawal from the Russian market do not appear to cost them as much as one might think. To be effective, these decisions must include the following:

The closure of all offices and representative offices in Russia.
To prohibit distributors from selling their products
The selling of all their assets in the Russian Federation as quickly and transparently as possible.
To discontinue all service and maintenance for their products.
To take all possible legal actions in order to prevent the illegal import of the company's products into Russia.

Due to EU sanctions, large Russian food producers are facing a shortage of special cardboard for food packaging. As a result, the Russian market has become even more volatile. Problems started to come to light after the EU adopted its fifth package of sanctions, which went into effect on April 9, 2022. These, coupled with US and British sanctions, restrictions forced Tetra Pak, a large Swedish packaging manufacturer that produced seven out of ten milk and juice packages in Russia, to cut ties with its Russian subsidiary. As no other company was willing to fill in the market gap, the Russian economy faced a shortage of packaging materials and was heading for serious problems.

Are sanctions against Russia working? What have they achieved? An explainer

In Russia, packaging materials are in short supply. It might look like a small victory from the outside, but Tetra Pak's exit and western sanctions threatened to cripple Russia's dairy sector and had the country unsuccessfully scrambling to produce alternatives. However, another international company agreed to help the Russian Federation make up for a packaging material shortage. On June 15, 2022, the financial director of the British company Mondi Group's Mondi Syktyvkar LPK plant announced that the plant was planning to experiment with packaging products that would soon be able to replace Tetra Pak.

What is Mondi Group, and who owns this plant?

The British company Mondi is a world leader in packaging and paper. The Russian division of this transnational corporation is one of the most highly profitable and high-margin. According to the company's 2021 financial report, Mondi group produced huge profits from its business in Russia.

british sanctions russia — Source: Shapshot from company website

As of 31 December 2021, the company’s own estimates put the value of all of its Russian assets at almost 687 million euros. Mondi SLPK, also called Mondi Syktyvkar LPK, is the group’s most prominent business in Russia. It employs about 4,500 people. Apart from Mondi SLPK, the company’s assets in Russia include the following three plants. Mondi Aramil is the only plant in Russia with a full-cycle production of flexible polymer packaging. As a result, more than 200 manufacturers from Russia and the CIS countries receive the company’s goods. Corrugated cardboard is also used to make packaging at the Mondi Lebedyan plant, whereas flexible packaging is produced at the Mondi Pereslavl plant. In 2021, the company was heavily involved in actively expanding its business in Russia. The Russian market accounted for approximately 12% of the company's global turnover. The company's 2021 financial report shows that Russian companies contributed roughly 20% of the group's core EBITDA, or earnings before interest, taxes, depreciation, and amortization, which is the measure of a company's overall financial performance, over the last three years. Many international corporations, including the British cooperation, Mondi, called out the war when the full-scale invasion began, albeit with a slight delay. On March 10, after sanctions started persuading international companies to leave Russia, the business announced its intention to sell all its Russian assets and leave the Russian market. This information can be found in a company statement.

Mondi solidarity with Ukraine british sanctions russia — Source: screenshot from company statement

A noble statement requires noble action

Two months after the announcement, Russian media reported that Mondi Syktyvkarsky LPK, one of the largest paper producers in Russia, continues all its former operations. In addition, plant director Klaus Peller confirmed that despite Mondi announcing its intention to sell its Russian assets, the company currently has no plans in place to shut down operations. On 3 June 2022, Peller spoke to a regional media outlet and stated that all manufacturing machines are functioning normally, with company revenue remaining at pre-war levels. Mondi Syktyvkar LPK, in his opinion, is the only pulp and paper plant in Russia whose assortment has not changed in terms of quality. It could be argued that such figures only indicate that Mondi retains its assets in Russia and that all previous announcements regarding its exit from the Russian market have yet to materialize, contradicting the company's postwar promise. To rub salt in the wound, the Mondi Syktyvkar LPK plant is currently experimenting with the production of packaging that will eventually replace Tetra Pak, according to Pavel Buslaev, financial director of the plant, perhaps demonstrating their aims of putting profits over morality and in turn, helping fund the Russian war machine. On 11 June 2022,

Mondi Syktyvkar supported the bike action “We are Russia! We are together!” and sponsored a bike ride. It is hard not to be deflated after reading the statistics, which show little, if not any, desire for Mondi to sell off its Russian assets. Whatever may be the reasons for the cooperation to yet move out of the market and stop funding Russia's war, it seems to possess the Russian way of 'double standards'-say one thing and do the complete opposite. Manufacturers of packaging materials such as Swedish Tetra Pak and Norwegian Elopak have left the Russian market. Mondi has so far absorbed its competitors' market share from those who have followed through on their promises. Now is the time for Mondi to make a tough choice, one or morality rather than a quick dollar. The same yet goes for many international companies. Discontinue all cooperation with the aggressor, sell all of your Russian assets, or you, too, have blood on your hands. I hope Mondi will soon make the moral and reputational decision to leave the Russian market once and for all.