'If you’re in the Russian market, think again'

The head of the Chicago Council on Global Affairs has news for American corporations in light of recent developments in Ukraine: If you’re doing business in Russia, consider getting out.

“If you’re in the Russian market, think again, because your access to that market is going to be restricted over time. I do think we’re going to see a very rapid decoupling of the Russian non-energy sector from the Western world. So if you’re invested big time there, time to look for alternatives,” Ivo Daalder said today on Crain’s weekly Juice livecast. Daalder is the former U.S. Ambassador to NATO from 2009 until 2013 and an expert in American foreign policy and European security. (Click on the link above to listen.)

Going forward, he said the era of globalization will wane, and instead, markets will split between democracies led by the U.S. and autocracies led by China and Russia.

“In that competition, we’re better to have supply chains run through democratic systems rather than autocratic systems. We’re better off reducing our vulnerability in places like, first of all, Russia, but, over time, China as well. American businesses are already looking at that in a new kind of way.” Even if such a shift means higher prices, Daalder said, “in the long run, we’re all going to be better off” from building more secure supply chains.

“We don’t have a choice of standing back. History has made clear that if there’s a major conflagration in Europe, it has a direct impact on us,” Daalder said.

Chicago companies are already bracing for the long-term impact of that conflagration: ADM has shut down facilities in Ukraine, with Oreo maker Mondelez to possibly follow. Kraft Heinz, which has more than 1,200 employees in Russia, has set up a task force to monitor the situation and is “working to maintain operations to ensure our food continues to be made and distributed."

Daalder also spoke about the impact of an oil and gas embargo for Europe and the U.S.—likely leading to higher gas prices at the pump, on top of inflation costs.

Should the U.S. embargo Russia? Yes, Daalder says, if done in concert with other Western countries. The U.S. is already taking the lead on export controls, which will affect 50 percent of high-tech exports into Russia and 20 percent of the country’s total imports. The move “will have a major implication. Not today, not tomorrow. It won’t stop war, but it will have a major implication on the future ability of Russia to continue to fight, and I think that’s where we need to be,” he said.

“The way we deal with the (former) Soviet Union is to contain them, put (economic and political) counter-pressure on them, and to create internal pressure for change,” he says. "If you think about Russia being the big snake that's trying to swallow Ukraine, what we're trying to do is step on its midriff to see if we can disgorge it again."

Listen to the complete conversation between Daalder and Crain's Greg Hinz and A.D. Quig here: