The invasion by Russia into Ukraine has not just resulted in unprecedented sanctions imposed by many governments around the globe, but also many Western companies have decided to impose their own sanctions by ending or suspending operations in Russia.
Over the last weekend, several major payment and technology companies announced they either have stopped their operations are in the process of winding down their activities in Russia.
As most companies are making corporate adjustments to their Russian operations, in some cases, they also add Belarus.
Alexander Lukashenko, the long-time authoritarian president of Belarus, has close ties to Russian president Vladimir Putin, and he allowed Russia to use Belarus as a staging area for its invasion of Ukraine. Hence, many put equal blame on him for the unprovoked attack on Ukraine as well.
“PayPal supports the Ukrainian people and stands with the international community in condemning Russia’s violent military aggression in Ukraine,” said PayPal President and CEO Dan Schulman in a letter posted by Ukraine’s Deputy Prime Minister Mykhailo Fedorov on Twitter. “Under the current circumstances, we are suspending PayPal services in Russia. We are also doing all that we can to support our staff in the region during this deeply difficult time.”
“With this action, cards issued by Russian banks will no longer be supported by the Mastercard network regardless of where they’re used – inside or outside of Russia. And, any Mastercard issued outside of the country will not work at Russian merchants or ATMs,” said Mastercard in a Press Release.
“We are compelled to act following Russia’s unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed,” said Al Kelly, Chairman and CEO, Visa in a statement. “We regret the impact this will have on our valued colleagues, and on the clients, partners, merchants and cardholders we serve in Russia. This war and the ongoing threat to peace and stability demand we respond in line with our values.”
“[W]e announced that we are suspending all operations in Russia. As a result, globally issued American Express cards will no longer work at merchants or ATMs in Russia. Additionally, cards issued locally in Russia by Russian banks will no longer work outside of the country on the American Express global network. We are also suspending all business operations in Belarus. This is in addition to the previous steps we have taken, which include halting our relationships with banks in Russia impacted by the U.S. and international government sanctions,” said Stephen J. Squeri, Chairman and CEO, American Express in a memo.
Adyen, which powers much of the eBay Managed Payments network said in a statement that it had not established a legal presence in Russia or Ukraine and any business exposures to Russia are very limited.
The company elaborated that it is following sanctions imposed by governments on Russia which means it will block transactions with entities that are under sanctions, suspend the availability of its US and EU processing services in impacted regions, e.g. the self-proclaimed regions Donetsk and Luhansk, and suspend transaction processing in Russian ruble (RUB) regardless of country of issuing and related details, on all payment methods.
A payment service similar to PayPal and often used by freelancers also made adjustments to its operations in Russia. In a community post, the company said it is not accepting new customers and it is still allowing Russian customers to withdraw funds to banks that are not on sanction lists. But that list could be growing as the US, UK, and EU continue to expand their sanctions.
Upwork (Freelance Service)
“Russian President Vladimir Putin’s war against Ukraine has challenged our mission, values, and our operational ability to bring economic empowerment to those who seek it. Upwork will be suspending operations in Russia and Belarus, starting today and taking full effect by May 1, 2022.”
“The first step will be shutting down Upwork’s support for new business generation in Russia and Belarus. Over the next few days, freelancers and clients in Russia and Belarus will no longer be able to sign up for new accounts, initiate new contracts, and be visible in search.”
“We honor the relationships that exist between our customers and recognize the swift adjustments that they will need to make as they process this announcement. As such, existing contracts with talent and clients in the region will remain open, with final billing due by May 1, 2022,” said Hayden Brown, President & CEO, Upwork in a blog post on the company’s website.
Support for Ukraine
In addition to announcing their corporate stance on Russia (and Belarus), companies often also included statements of support for Ukraine with many having staff in the country they are trying to help them through this crisis, including financial support and setting up methods for customers to help the people in Ukraine.
The war came especially close to eCommerce SaaS company BigCommerce which has over 100 employees in Ukraine. On Sunday the company revealed to CNCB that their Kyiv offices were within a half-mile of a TV station that was bombed by Russia two days earlier.
Fortunately, company employees had evacuated by that time, but apparently, at least five people died from the attack.
Just a week earlier, BigCommerce CEO Brent Bellm spent a few minutes in the company’s February 28 earnings call discussing the situation in Ukraine and how it has affected its employees. This was before the attack near their office in Kyiv.
“Several [employees] have reported as being in places where they are not safe, whether inside Kyiv or outside. We at BigCommerce are working around the clock 24/7 to ensure full support for them, no matter what situation they are in. We have a full range of communication infrastructure and activity coordinated to help and our employees have reported back as receiving and appreciating that support. We will continue to do all in our power to support our Ukrainian employees can we pay for the restoration of peace, safety, freedom, and sovereignty for their people.”
In addition, Bellm said that “[s]everal have joined the military and taken up arms in defense of their country.”
Ukraine Tech & eCommerce Hub
Ukraine has become a popular tech and eCommerce hub with the tech sector accounting for 4% of the country’s GDP. BigCommerce is not the only company that is being affected by Russia’s aggression of Ukraine.
The Business Standard reports that according to one count, Ukraine has over 240,000 tech specialists and more than one hundred R&D centers operated by international companies. Employer review website Glassdoor shows more than 400 tech companies have offices or affiliated contractors in Kyiv alone.
Multinational corporations such as Microsoft, IBM, Google, Oracle, Amazon (AWS), SAP, Adobe, Intel, Meta, Snap, eBay, Wix, BigCommerce, make up some of the top names on the Glassdoor list, with many of these having an impact on the eCommerce industry.
But there are hundreds of others, many of which offer specialized services in eCommerce, payment processing, and even supporting delivery technology.
While the big companies can shift their operations and the impact on eCommerce merchants in the US or Europe may be less visible, it’s a completely different situation for merchants running DYI open-source eCommerce software such as WooCommerce, Magento, or Prestashop.
Ukraine is also home to many talented tech freelancers and entrepreneurs developing extensions, plug-ins, themes, and services such as SEO optimization, social media management, listing services, server maintenance, design, etc.
This is where online merchants may feel a direct impact. Many of these folks are either fighting the Russian aggression, fleeing the country, helping to get family and friends safe, or are in areas where electricity or the Internet are not working due to the Russian military’s attacks.
Communication, project updates, software updates, or even payment services could easily be interrupted or not possible at the moment with these Ukrainian-based entrepreneurs or freelancers.
Right now is not a good time to make rash decisions. But eCommerce merchants that work with small companies and freelancers in Ukraine should monitor the situation and if they feel that the freelancer or vendor cannot continue, may need to look at alternative solutions.
Russia and Belarus
While bombs may not be tearing apart the country, Russia and Belarus are becoming increasingly isolated from Western countries.
The anger is clear in some of the statements made by corporations pulling out of Russia and even if Russia stopped the aggression against Ukraine today, it would take a long time for corporations to gain any trust to restart operations in Russia (and Belarus).
Just like Ukraine, Russia, and to a lesser extent now Belarus, has been home to many small businesses and freelancers working on plugins, themes, extensions, and services.
While the vast majority of these small companies and freelancers are not being targeted by government sanctions directly, the financial sector sanctions are impacting the ability of ordinary Russian citizens to get access to hard currency payments through services like PayPal or Payoneer.
In addition, there are entrepreneurs that build their business utilizing developers in Russia or Belarus but who have their business addresses in the US or Europe. While merchants may think they are working with a US or European company, the primary development of the service or software may be in Russia or Belarus.
As a result of government sanctions and corporate decisions to exit these countries, it is becoming more difficult for these small “Western” companies to transfer funds to Russian or Belarusian developers.
Even the movement of cryptocurrencies is being targeted by sanctions. But how these rules aimed at Russian oligarchs may impact smaller crypto transfers (ie paying developers) from Europe to Russia is somewhat unclear. In addition, the US is considering more regulations regarding cryptocurrencies, all part of a push to make the sanctions stick.
eCommerce merchants that have significant exposure to Russian and Belarusian developers, directly or indirectly, should consider alternatives quickly. These financial sanctions are not going away soon and if anything, it seems there is news daily of new sanctions and newly targeted entities in Russia (and Belarus).
eCommerce merchants and sellers on marketplaces like eBay, Etsy, Amazon, etc. should be okay as the only impact of sanctions is that they won’t be able to sell and ship orders to Russia (and Belarus). As of now, there are also a number of marketplaces limiting shipments to Ukraine because of the uncertainty of delivery services there.
Online Merchants using large SaaS commerce platforms such as Shopify, BigCommerce, Squarespace, Cart.com, Wix, etc., for the most part, should be okay as well as these companies will shift around resources to maintain their platform’s operations.
However, just as is the case for online marketplace sellers, shipping is problematic for all online merchants trying to send orders to Ukraine, Russia, and some surrounding countries. We maintain a post with the latest shipping updates for US merchants here.
And as already suggested, eCommerce merchants using open-source software should review their exposure to extensions, plug-ins, themes, and other services to see what adjustments they may need to make in consideration of the uncertainty regarding Russia’s invasion of Ukraine.
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