International Paper announced Friday afternoon that it may sell its 50% stake in a major Russian forest products company, but said it won’t suspend operations for now.
The announcement comes as hundreds of businesses are leaving Russia following Russia’s invasion of Ukraine last month and massive western sanctions that seek to weaken Russia’s authoritarian leader Vladimir Putin.
Since 2007, International Paper has operated a 50-50 joint venture with a Russian company, Ilim Group, which is led by billionaire Zakhar Smushkin and his colleagues. Together, International Paper and Ilim Group work to harvest Russian trees, process them into wood pulp and export the products, mostly to China.
Recent reporting by The Commercial Appeal had highlighted Ilim Group’s links to high-ranking politicians in Russia. Dmitry Medvedev, a close ally of Putin, formerly worked for Ilim Group.
And in the early 2000s, before International Paper was working with Ilim, media accounts and a news release from Ilim had also described how the company had asked Putin to save Ilim from a hostile takeover attempt from a rival businessman. Putin reportedly intervened to help Ilim.
In depth: International Paper made huge investments in Russia. Now it could face backlash.
Wall Street analysts said the Ilim Group partnership now presents challenges to International Paper’s reputation as an ethical company.
A British environmental group, Earthsight, on Friday released a report criticizing International Paper and other companies with Russian investments.
“What we found is that Russian oligarchs with close historic ties with Vladimir Putin are behind the country’s largest logging companies and wood products exporters,” the report says.
The Friday afternoon news release from International Paper was two sentences long:
“International Paper (NYSE: IP) announced its intention to explore strategic options, including the possible sale, of its 50% ownership interest in Ilim Group.
“International Paper has no intention to seek suspension of operations or initiate any liquidation or bankruptcy proceedings with respect to Ilim Group.”
A Yale University project has identified about 350 companies that have curtailed their Russia operations, including Memphis-based FedEx.
International Paper is one of about 30 companies on a much shorter list compiled by Yale: “Companies that remain in Russia with significant exposure.”
Investigative reporter Daniel Connolly welcomes tips and comments from the public. Reach him at 529-5296, daniel.connolly@commercialappeal.com, or on Twitter at @danielconnolly.
