JT CEO: Maintaining Russian Business Despite Sanctions

According to a report by the Financial Times on May 1, the CEO of Japan Tobacco, Masamichi Terabatake, stated that the company will retain its business in Russia to meet investor demand after reshaping its supply chain to comply with sanctions.

According to the report, Japanese telecommunications company JT is conducting some business through Turkey and is transferring key personnel to Hong Kong. JT initially stated that it would consider selling its Russian business after Russia's invasion of Ukraine in 2022. Terabatake stated that the Russian business accounts for 20% of JT's total profits.

"For example, if I were to say that we are considering exiting this business, investors may face the risk of losses," Terauchi said. "In the worst-case scenario, if we were to terminate a business that we could have continued, we may even face the risk of shareholder lawsuits."

JT, which has over 4,000 employees and four factories in Russia, is one of the largest foreign companies in the country. In 2023, JT's overall profit was 482 billion Japanese yen (3 billion US dollars).

"In the sanctions, there are many things we need to be careful about – who can participate or not participate in decision-making, excluding people from countries unfriendly to Russia in the future… to putting unrelated individuals in places like Hong Kong,” he said. Terahata discusses the new structure of Japan Tobacco after implementing extensive sanctions on Russia. “But other than that, everything remains the same. We are making efforts to ensure some degree of isolation by shipping goods from Turkey, as some countries are unable to trade with Russia.”

After sanctions were imposed, many companies and investors left Russia. However, some companies chose to stay, including Philip Morris International. At the same time, Japan also implemented sanctions against Russia.

"Indeed, initially there were concerns about continuing our operations, but recently, this is no longer a problem," said Terahata. "People are asking less and less about why JT continues to do business (in Russia)."

JT has yet to answer investors' questions about how profits will flow out of Russia and back to shareholders. To date, the Russian entity has not paid dividends from its financial performance in 2022 and 2023. Terabata stated that he is still prepared to "divest or sell off the Russian division in the worst-case scenario," but he believes it is not necessary to do so under the current sanctions regime.