Icon of post-Soviet Russia: Significance of McDonald's closure in Russia is huge, here's why

To take a stance against the Russian "military operation" in Ukraine, global fast-food giant McDonald's Corp on Tuesday (March 8) announced that it would temporarily close all 847 of its restaurants in Russia.

In the aftermath of Russia's invasion of Ukraine, western countries have been imposing sanctions on Russia to cripple the economy. To increase the pressure, other global brands have also pursued the same as they have paused operations in the country.

While announcing the decision, McDonald's said it would continue to pay salaries to its 62,000 employees in Russia. The company's CEO Chris Kempczinski stated that "our values mean we cannot ignore the needless human suffering unfolding in Ukraine."

McDonald's closure is in particular of huge significance because of its large size and global reach. Whenever it takes a stance on an issue or makes a major operational change, it is often copied by other companies around the world.

The announcement is also will also carry symbolic importance in Russia, where the first location to open, in central Moscow in 1990, became an iconic symbol of flourishing American capitalism as the Soviet Union fell.

McDonald's had, in a way, opened Russia to the Western culture after the Cold War as thecompany opened its first location in Moscowthree months after the fall of the Berlin Wall.

Paul Musgrave, assistant professor of political science at the University of Massachusetts Amherst said, "When McDonald's moved into the Soviet Union, it was part of a message of opening up and building trust and cooperation between Russia and the West."

"And now those avenues have all been closed off. And so Russia's having McDonald's exit that market really brings a bookend or close to that era. And we're kind of standing in, symbolically at least, a new era of division between Russia and much of the rest of the world," Musgrave added.

"I think there is going to be a little bit of a noticeable hit to McDonald's bottom line. In their 2020 annual report, they had $500 million of assets denominated in rubles that they had to look out for. International business accounts for more than half of McDonald's corporate revenue. Russia is a smaller part of that, but it is a real part of it. So there is a real hit," Musgrave said.

Apart from McDonald's, Coca-Cola and coffee chain Starbucks become the latest firms to suspend operations in Russia. Previously, brands like Visa, MasterCard, Nike, Netflix, Alphabet, Apple suspended sales or operations in Russia.

(With inputs from agencies)