"Moral" and "ratings agency" are words not usually found together. S&P, Moody's and Fitch – the best known of the lot – crunch numbers and assign scores for creditworthiness, typically without straying into ethics. After the 2008 financial crisis, moreover, their own behavior was under scrutiny. Cozy relations with the companies they rate created an obvious conflict of interest and led to charges they were complicit in the scandal.

Moral Rating Agency, then, attracts attention as the name of a new outfit. Set up days after Vladimir Putin brought war back to Europe, its sole purpose today is "to get Russia out of Ukraine and use this momentum to help pro-democracy Russians get Putin and his regime out of Russia." In line with that objective, it rates corporations not on the usual criteria but on their role in and exposure to Russia, all of which makes it sound more like a pressure group than a commercial agency (its business model is unclear).

Figure 1: Bang out of order: Are tech companies reversing out of Russia fast enough?
(Source: ITAR-TASS News Agency/Alamy Stock Photo)

Various tech and telecom companies show up in its reports, however, and several feature prominently in the latest research published this week. Mark Dixon, the founder, examined the world's top 200 corporations and identified 47 that still have Russian assets at risk of expropriation by Putin. LG Electronics, Samsung, Huawei, Intel, Alibaba, Siemens, Tencent, Microsoft and Bosch are all on the list.

Dixon's company assigned an "exposure level" score of between 1 and 10 to each of the 47 companies, with those awarded a 10 deemed to be in the worst position. Topping the list is Japan's Mitsui, which holds a 12.5% stake in Sakhalin-II, an oil and gas development project, as well as a 10% stake in Arctic LNG-2, a gas project. Moral Rating Agency puts the combined value of these stakes at roughly $5.1 billion, equal to about 15.3% of Mitsui's market capitalization.

Another ten companies were also awarded a 10, but none from the tech sector. The most exposed tech company, according to the analysis, is South Korea's LG Electronics. Awarded a 5.7, it is said to maintain a factory in Russia and derive 2.4% of its global revenues from the Russian market. A separate list maintained by the Yale School of Management includes LG in its "suspension" section, meaning it has temporarily curtailed most activities but is keeping its options open for a future return.

Samsung, the next most highly exposed tech company with a Moral Rating Agency score of 3.8, is also on Yale's suspension list. With a plant in Kaluga, it usually generates about 1.5% of its global sales in Russia, according to the research. For Western companies such as Intel (scoring 2.8) and Microsoft (just 1), exposure is very limited. Both employ software people in Russia but do not appear to have other assets there. Just 0.06% of Microsoft's revenues are estimated to come from Russia.

This would all seem to cast the technology sector in a relatively favorable light from the Moral Rating Agency's perspective. Dixon has little apparent sympathy for companies that are highly exposed to the risk of expropriation, essentially regarding them as victims of their own immoral dealings in the Russian market. "Russia has for many years been run by a very bad regime and we think an ethical company should not have been in Russia for many years," he told Light Reading.

He points out that about 30% of the world's top 200 companies have resisted any Russian involvement whatsoever. Others, including Amazon, have traded with Russia but avoided entanglement by keeping most operations outside the country. The Internet giant has suspended any operations there, according to the Yale School of Management.

Excuses, excuses

There are some caveats for the Moral Rating Agency. Dixon concedes that assets owned by Chinese companies such as Huawei are unlikely to be expropriated while China's government sides with Putin. "The chart was really ranked by value of assets as a percentage of market capitalization and not adjusted for the risk for different nationalities," he said, referring to his research.

Indeed, Russia is arguably a growth opportunity for Huawei. Following withdrawals by Ericsson and Nokia – two companies that do not feature in the Moral Rating Agency's latest research – there are few other suppliers that will sell products to Russian networks. After years of consolidation, Ericsson, Huawei and Nokia accounted for 72% of all radio access network equipment sales in 2019, according to Analysys Mason, a consulting and analyst firm. Russia has no homegrown equivalents.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

Another caveat is the acknowledgement by Dixon that asset values have plunged in Russia, making it hard for companies there to offload facilities. He does not, however, accept this as a valid excuse for remaining in Russia. "We are very unconvinced that the companies that said they were selling in March and have made no progress nor disclosure until July were sincere," he said. "If it was impossible to sell, they could have said that … We think many had no intention of selling but just wanted to bat away the pressure."

Some companies defending their involvement in Russia have argued pulling out now would be to abandon employees and hand control over important assets to Putin. Could the organizations that withdrew fast – worried about pro-Ukrainian boycotts in more lucrative markets rather than the wellbeing of Russian staff – not also be questioned morally?

"There are always excuses for not pulling out," is Dixon's response. "Concern for employees is a great excuse we label 'confused humanitarian.' Apart from the questionable sincerity of companies … we think there is a higher moral obligation to bring down the Russian economy than take care of employees. With a military response off the table and diplomacy proving to have failed, the economic pressure is the only one left."

Ultimately, he advocates an "economic separation" between the West and Russia. Because those various Western economies are an estimated 35 times bigger than Russia's, this divorce would generate a lot more pain for Russia than it would for the West, according to Dixon. Wherever one's sympathies lie, the death of globalization would seem like a relatively safe bet.

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— Iain Morris, International Editor, Light Reading