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Comment by mupuff1234 | Hacker News Reader

Can you sell the Russian business without violating the sanctions?

Russian social media are full of winking posts hinting that McDonald's will sell operations to a Russian company which it will still profit from "behind the scenes" (via offshore proxy or some other indirect way). They also hint that this will pave the way for other Western companies currently in limbo: split ownership between controllable proxy and Russian owner. And at the same time shout in Bloomberg how much you condemn Russian invasion to pacify Western public.

Can anyone confirm if it's possible? I hope it's Russian desinformation again, but I fear it's possible looking at how "well" Western "sanctions" work (Moscow feels great, ruble is much stronger than even pre-war).

Can't confirm and anyone who can, will not. Sanctions evasion is something OFAC frowns upon and comes down on rather heavily. Just few weeks ago banks that were 'offering options' to customers were smacked down[1]:

"The US Department of the Treasury in a statement said it put sanctions on Russian commercial bank Transkapitalbank, whose representatives it said serve several banks in Asia, including in China, and the Middle East, and have suggested options to evade international sanctions."

So.. yeah. It is possible ( even with total embargo it can happen as NK has shown ), but it comes with risk. If it will be done, it will be done very quietly with as few people knowing as possible.

[1]https://www.aljazeera.com/economy/2022/4/20/new-us-sanctions...

It's just one of the possibilities. It's not like corporations aren't full of “government relations” staff whose job is inventing creative names for bribing officials, and creative methods of doing so. Especially in “interesting” countries where it's easy to have an excuse that “everyone does that”.

There is technology that can be important for military industry; no doubt it is going to be tightly controlled. There are people who decided it was unacceptable to work in Russia; it was their choice. However, these corporations are not people, nor they are important in the arms race. If we skip the fact that Central Bank severed everyone's ability to do business to control the money flow out of the country, corporations that left Russia made statements about leaving it for the media picture. And flashy media picture is once again really important to hide the elephant in the room — what really powers Russian economy, and how. It's not McDonalds.

Ruble is definitely not much stronger, it’s just practically frozen so it is not defined by free market rules, but by Russian government made ones.

I have seen a lot of people write this but I don't understand how. Shouldn't there be a black market rate in that case? Is there one? Some quick Googling gave no articles.

I am almost sure there is such market. If you visit Russia somehow, you are likely to exchange currency with citizen at beneficial rates. Chances are its very similar to pre iron curtain fall - people made fortunes in Poland on such exchanges. Same thing in Cuba, there were two currencies - one local, one for internationals(unsure how it is now).

Ye. I mean just cutting out Forex middleman is beneficial.

It would be interesting to know the "real" rate to get the scope of the currency control.

No, Moscow is fine and you can buy foreign currency freely now. This is a delusion based on Western politians' loud promises which never came true. We were promised crushing sanctions that would reduce Russian economy to 1980's style rubble with black market of foreign currencies. It's all just a load of hype. It's important to set this clear because most of HN commenters seems to be under impression those sanctions actually had intended effect.

Can you buy a new car with all this money?

Yes. It's more expensive than before, but there's a thriving market on Telegram with prices fixed in EUR/USD. Also Chinese cars sales are growing and soon market will be flooded.

So second hand at black market rates. Sounds like sanctions are working after all.

There is not much use for dollars in Russia right now other than hoarding them (you can buy goods, but many imports are sanctioned). And after initial panic subsided, trust in the banking system looks quite high so people are less keen on hoarding cash.

Also, if you are an oligarch who plans to load your private plane with suitcases of dollars and fly to the Cayman islands, you are probably sanctioned, so that is out of question too.

No problem flying to Dubai to Istanbul and using their banking system. Actually most of Russian and Belarussian elite are happily using it. You can meet all kinds of adult kids of Lukashenko, Yanukovich there or an odd Russian silovik.

There are black markets in the form of Telegram chats and bots where people exchange cash. They aren't so necessary right now because certain limitations have been lifted and while it's not easy, you can buy cash USD or send wires to other countries.

There are two things holding the ruble high: 1. All exporters have to sell 80% of their FX income in 3 days 2. The import has shrunk dramatically and it's hard for people to travel to other countries (so individuals and businesses don't need that much cash to begin with)

Where do you get that? You can actually buy dollars in Moscow from banks. Everything is mostly back to normal or even better (retail banks sell dollars cheaper than pre-war levels). There was a brief panic and tight controls in anticipation of more severe sanctions but they never came.

Russian here. You have no point, check any exchange, in case of the accessibility Binance p2p There was growing black market exchange once ruble fallen to the 115ish to usd, and the spread was about 20%, so you could buy green cash at 150ish, but since then those exchanges shrinked.

It's actually 64 RUB per USD, Tinkoff bank sells for 67 for example. Compare to 78 pre-war. This week Central Bank lifted another restrictions and you can get up to $50k out of the country. I think unfortunately Americans drank Biden's lying kool-aid of "devastating sanctions" and happily looked away prematurely.

> McDonald's will sell operations to a Russian company which it will still profit from "behind the scenes" (via offshore proxy or some other indirect way).

so Huawei way of solving sanction issues...

let's all pretend Honor is now different entity bought by bunch of unrelated companies

Thats what GM(opel), IBM(dehomag) and Coca-Cola(fanta) did during WW2 in Germany. But I have a feeling it wont fly nowadays with social media and politicians hungry for grandstanding, especially in light of recently passed second Lend-Lease.

I'm not sure who downvoted you. It is a good question. McDonald's and other consumer goods type companies are not sanctioned, so the company can sell its assets. For that matter they could continue to operate as normal in Russia if they choose.

I'm not sure they really could easily continue to operate as normal. Their business units in Russia get paid by consumers in rubles, but due to the financial sanctions, they can no longer convert rubles to US dollars [1]. From the point of view of their non-Russian shareholders, this effectively means all that money is inaccessible. This would result in complications in reporting the revenue on their income statement. Plausibly (I am not an expert), this would mean they can't even recognize the revenue at all. At minimum, it becomes an open question whether or not the revenue will ever benefit the corporation or if it will be 'trapped' perpetually.

[1] This is my understanding. If someone knows better, please post. One source that goes into some detail about the current situation is: https://www.washingtonpost.com/business/energy/how-war-and-s...

You're right, currently you can't get your revenue outside unless you're down to use a scheme involving exchange for trades inside Russia, move them outside and turn back to money. I've diagonally read the article linked and it depicts everything correctly.

Diagonally?

"To read diagonally" is a Russian idiom meaning "to skim-read".

In Russian "to read diagonally" means "to skim" in English. Like, you don't read left to right, top to bottom, but straight from one corner to the other.

In French as well, FWIW.

French is now in bed with russian? Mont dioaux ;)

In 19th century, almost every Russian either spoke French fluently, was a priest or couldn't read.

Tolstoy’s “War and Peace” is about 2% French (~40 pages), the language of the Russian aristocracy at the time

France and Russia have been frenemies for a couple of centuries now :)

Finally a use for Bitcoin?

Only if there is someone who'd like to sell in rubles.

Not sanctions, but Russian regulation. From your link:

>The Bank of Russia more than doubled the benchmark interest rate to 20%, a 19-year high, on Feb. 28 and also imposed capital controls, including a ban on foreigners’ selling of securities. Nabiullina said decisions to suspend some regulatory requirements amounted to a capital boost for banks equivalent to 900 billion rubles ($8.7 billion). Putin banned all Russian residents from transferring foreign currency abroad, hardening capital controls.

Interest rate is already back to 14%[1]. Russian economy recovered super fast. Ruble is already stronger than before war (around 64 RUB for USD). Basically sanctions are a joke made for Biden to shout once before American public attention shifts to Amber Heard trial or some other spectacle of the day.

[1] https://www.reuters.com/business/finance/russian-central-ban...

If you read your article you'll learn they are cutting the interest rate back because of sanctions (to mitigate the effects), and inflation is still soaring. 20% is not sustainable, analysts have seen this coming as Russia tries to avoid a recession, in fact the drop by 300 bps was larger than predicted.

>Ruble is already stronger than before war

This is completely irrelevant if you can't sell it for USD.

Where do you get this? You can buy USD officially at most banks. Tinkoff for example sells it for 67, which is once again even lower than before war.

It sounds like Russia might get declared a terrorist state soon. I assume that changes things.

> It sounds like Russia might get declared a terrorist state soon.

Lithuania has apparently already done that.

As it should be.

https://www.dailymail.co.uk/news/article-10797707/Russian-br...

I think the problem is that they may not be allowed to bring the money outside Russia, as there are now capital controls on foreign currency. That's why there a few foreign factories, like Renault who seemed to have "sold" them for like 1 ruble.

For context, Renault sold its majority stake in AvtoVAZ (Lada, 45k employees) today for 1 ruble to the Russian government, with the option to buy-back for the next 6 years:

https://www.lemonde.fr/en/economy/article/2022/05/16/french-...

Legally? I'm sure there are a fair number of ways. For those who don't recall when Pepsi (as in "Pepsi Cola") had the 6th largest navy in the world:

https://www.warhistoryonline.com/instant-articles/pepsi-once...

But if you're running a huge consumer-brand corporation in the social media age, with the great majority of your sales in places where Russia's recent actions are very unpopular, then "could we legally continue...?" is not basis for your decision.

I used to love that story (about Pepsi's navy), but it actually doesn't seem to be true, unfortunately. There was a deal in place, but it never happened thanks to the 1991 breakup of the USSR. And even if it had, the small number of ships involved wouldn't even be close to the 6th largest fleet.

https://melmagazine.com/en-us/story/did-pepsi-have-one-of-th...

They won't be able to sell them at all. Putin has already said that any companies that leave Russian markets as a result of the current conflict will have all their assets nationalized. This is what happened to McDonalds in the Donbass -- they're still operating and called "DonMaks". The experience is extremely similar to a normal McDonalds. The only thing that is obviously different is the fries.

https://www.instagram.com/p/BLkrs5FBkct/ https://www.instagram.com/p/BSQzA_dhatu/ https://i.insider.com/58dd477677bb70f13a8b4c89?width=1190

What about the fries is different?

They're just normal fries, made fresh from potatoes. McDonalds fries are a result of a process of many steps.

IANAL but Russia is legal to do business with with exception of certain corporate entities and individuals. There's a deny-list, not an allow-list.

Unfortunately, since the latest war the deny-list has grown substantially (making it a bit difficult to ensure you aren't accidentally servicing someone involved with a sanctioned entity), combined with political pressure this prompted some businesses to go an extra mile and cease operations in Russia completely.

Russia has uniformed soldiers in there conducting war -illegally, if wars are other than illegal, or at least not sanctioned by the UN and also committing war crimes.

But I don’t think it’s terrorism. Terrorism usually has a few criteria: not a regular army, and typically don’t use heavy military equipment but rely on guerrilla tactics and aim to terrorize because they are incapable of taking over a territory —because of a lack in numbers for control.

They would also qualify if they “export” terror by training, providing comfort and logistics to terrors groups. Maybe the latter applies more than the former. Though a few other countries could easily be labeled as such too.

There’s plenty of evidence though that the Russian army is seeking to terrorize civilians, including bombing hospitals / schools and leaving mines and booby trapping homes of civilians, specifically because they are having trouble taking over the territory. It would be weird to me that a military unit can do what terrorists do and not be labeled that way just because they are officially part of an army and have modern equipment. That’s not something a “normal” army does to protect its territory. https://ctmirror.org/2022/05/16/designate-russia-a-state-spo...

I think we need to be careful. Is it the stated goal and mission to terrorize or is that being carried out by rogue units? Most army and war operations do have rogue units —those doing things on their own. Just about any war has this aspect. If this is a criteria then we’ve all been terrorists and calling terrorism ceases to have a defining meaning.

But again it likely depends on how widespread and sanctioned or ignored by superiors these tactics are in the current conflict.

I understand the need to be careful but when you have widespread reports of execution and rape of civilians in all the areas being invaded by Russia (i.e. all 3 fronts) it seems to be more of a pattern than an exception.

Look, there is no denying war atrocities. But all conflicts have them to one degree or another. If we go by the definitions above, then most allies (and foes) have engaged in terrorism too, including ourselves and then the distinction the term provides disappears.

Let's look at it from another angle. In order to submit the people of Ukraine, has Russia taken out all the stops? Do they have other more lethal and effective options?

Have you misplaced your comment? It is obviously an ethically grey area, but the question was whether it violates sanctions or not. It isn't, as far as I know (if there's someone better informed I'm happy to be corrected).

According to Russia it’s a “SVO”, not a war. Which means they are not soldiers. Ukraine keeps treating them in a humane way, but technically they could be just shot on sight. Russia wouldn’t care anyway, they don’t even bother to pick up corpses.

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