McDonald’s Corporation (NYSE:MCD) has announced that it’s temporarily closing its three branches in Crimea, and while it doesn’t explicitly mention the recent Russian annexation of Crimea as the reason, it has drawn a backlash from some Russian politicians.
“Due to operational reasons beyond our control, McDonald’s has taken the decision to temporarily close our three restaurants in Simferopol, Sevastopol and Yalta,” said a company spokesperson, Natalia Zinets and Alessandra Prentice report for Reuters.
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McDonald’s Corporation (NYSE:MCD) is usually thought of as a franchise operation, but the corporation directly operates a large number of locations worldwide, including the three in Crimea. While the closures aren’t part of the targeted sanctions against Russia, they are a good reminder about the secondary effects of any economic disruption. If the tension in Crimea continues to escalate it wouldn’t be surprising if other Western countries decided to follow suit (Deutsche Post has already stopped accepting letters bound for Crimea, Reuters reports).
Russian politician calls for McDonald’s picket
Deputy speaker of the Russian Parliament Vladimir Zhirinovsky has said that the closures don’t go far enough. “It would be good if they closed here too … if they disappeared for good. Pepsi-Cola would be next,” said Zhirinovsky, who called for people to picket the fast food chain.
McDonald’s Corporation (NYSE:MCD) isn’t likely to leave Russia anytime soon, it has more than 400 branches there, including one of its most successful in Moscow’s Pushkin Square. Unless economic sanctions become more severe than anyone really expects, the company isn’t going to walk away from that much revenue. If the anti-Western rhetoric continues to be directed at McDonald’s as a proxy for the US, it could hurt their sales.
Putting McDonald’s diplomacy to the test
Armchair political scientists will remember that Thomas Friedman once claimed that no two countries with McDonald’s Corporation (NYSE:MCD) restaurants have ever gone to war. His argument was that once a country has a sufficiently robust middle class, it isn’t willing to risk prosperity by going to was with countries that have similar economic interests. It’s probably also true that in order for the Golden Arches to be popular, anti-American sentiment can’t be all that high.
Russia and Europe undoubtedly have common economic interests (the US and Russia probably less so), so we’ll have to hope that Friedman’s premise holds up.