German companies leaving Russia face legal complications

In the days following Russia’s invasion of Ukraine, German software giant SAP halted all sales to Russia. But it has drawn the ire of Ukrainian leaders by continuing to offer updates and access to cloud computing to Russian customers not targeted by Western sanctions.

This week, SAP, which makes enterprise software to handle tasks such as logistics and accounting, announced that it was taking the final steps towards an “orderly exit” from its operations in Russia, a process which, according to he had been made more difficult by his concern for the employees. and Russian laws prohibiting unilateral termination of contracts.

“We are not in the consumer business – we sell very complex software solutions,” said Luka Mucic, chief financial officer of SAP, explaining what he called the “significant complexity” of closing three decades of activity in the country.

SAP’s statement went further than its previous announcements since the invasion, noting its “intent” to cease supporting and maintaining its products. The withdrawal could erode the back-office IT operations of many Russian companies, including Sberbank, Russia’s largest financial institution. In 2018, SAP created what it called “Russia’s largest cloud project” to manage Sberbank’s 230,000 employees.

SAP’s planned exit follows that of other German companies like Henkel, maker of household cleaning and hair care products, network provider Deutsche Telekom and home improvement chain Obi. Yet others remain in Russia and face tough decisions as the war expands into its next phase.

Among them is the automotive supplier Continental, which said on Wednesday it had been forced to temporarily restart production at its tire plant in Kaluga, on the outskirts of Moscow.

Continental said it supports economic sanctions against Russia. The company stopped production in the country in early March, days after the invasion.

But the company said it now faces increasingly punitive Russian laws on foreign companies and needs to restart the plant to produce car tires for the Russian market.

“We are only doing this temporarily because we want to protect our employees,” said company spokeswoman Birgit Hiller. “We will not make a profit.”

Legal obligations have also made it more difficult for SAP to exit its Russian business, the company said. SAP stopped all sales in Russia and Belarus on March 2. Three weeks later, he began actively shutting down the company’s cloud operations in the country.

At that time, cloud services for customers who had been sanctioned were discontinued. Other customers have had the option of having their data returned, deleted, or moved to a server outside the country. That offer was met with accusations that SAP was supporting the companies that carried out the murder in Ukraine.

Last month Ukrainian President Volodymyr Zelensky berated SAP, Oracle and Microsoft in a Twitter message to support “the bloody Russian aggressor”. It was the first time he had directly named multinationals.

“Stop supporting your products in Russia, stop the war! he said.

SAP said on Tuesday that while it could not prevent any former customers from continuing to use its software, the company was legally required to provide unauthorized users with options to manage their data.

“Data in data centers belong to customers, not to SAP,” he said.

If companies choose to have their data moved by SAP to a cloud server outside of Russia, SAP said it won’t renew their contract.

James R. Rhodes