Target food

'Too big to fail': White House careful not to target food companies as it pressures Putin

U.S.-based Cargill and other large agribusinesses are still operating in Russia, arguing they are essential to the global food supply. The Biden administration isn’t trying to stop them.

By MEREDITH LEE

A growing global food crisis is forcing the Biden administration to balance its crushing economic campaign against Russia with a gentler approach to major U.S. food and agribusiness companies still operating there — and contributing tax dollars to Russian President Vladimir Putin’s regime.

While Ukrainian President Volodymyr Zelenskyy has repeatedly called for all foreign companies to pull out of Russia as punishment for Putin’s bloody invasion of Ukraine, calling out some individual conglomerates by name, President Joe Biden has been extremely careful not to pressure any specific company to leave Russia or allow U.S. sanctions against Russia to affect food flowing in or out of the country. In a prominent example, neither the administration nor Democratic lawmakers have critiqued agriculture shipping giant Cargill Inc., the country’s largest privately held company, which is still operating what it says are “essential food and feed facilities” in Russia. The White House even hosted Cargill CEO David MacLennan earlier this week as part of a meeting with corporate leaders to discuss the conflict with Ukraine and its effect on already-strained global supply chains.

During the meeting, top Biden economic officials thanked the companies that had pulled out of Russia for doing so, but officials didn’t make any mention of scaling down Russian operations, according to three people with knowledge of the discussions. Instead, they focused on how food companies could stave off further disruptions to the global supply.

Cargill is the world’s largest agribusiness and one of the “Big Four” meat processors that control about 85 percent of the beef market in the U.S., and is a target of the Biden administration’s campaign to lessen the power of the country’s dominant food conglomerates. But Cargill is also one of the world’s largest shippers of grain, especially from Russia and Ukraine, which together make up 30 percent of the world’s wheat supply and 20 percent of its corn supply. And now, some of the same Biden administration officials who have been waging a war against “Big Ag” are working with some of those same companies to combat mounting food insecurity around the world.

“Each individual company has a responsibility to make decisions for itself, for its shareholders and for its customers,” Agriculture Secretary Tom Vilsack said in an interview. “The reality is that this is a tough situation for those who are doing business in the food business because they are providing, potentially, food for folks outside of Russia.”

Food and agribusiness conglomerates aren’t violating any sanctions by continuing to import and export products from Russia, according to administration officials. But the outside pressure has forced companies to decide what they want to consider “essential” business in Russia.

Just this week, Swiss-based Nestle announced it would further scale down its Russian operations, after Zelenskyy singled out the company in a video posted to Telegram last week.

While some companies like Coca-Cola, McDonald’s and Starbucks have suspended Russian operations entirely, others including PepsiCo, Nestle and Cargill are citing humanitarian reasons for maintaining at least some portion of their sales and production in the country.

Nestle and PepsiCo say they are continuing to provide products like infant formula and other nutritional products in Russia. Cargill and fellow agricultural giants U.S.-based Archer Daniels Midland and Bayer, of Germany, argue they’re providing a critical source of food not only inside Russia, but also for the rest of the world as prices have skyrocketed and the fate of Ukraine’s next growing season is under threat. The world’s other major commodity merchant, Louis Dreyfus Company, based in France, has suspended its Russian operations.

“Food is a basic human right and should never be used as a weapon,” Cargill said in a statement earlier this month. “This region plays a significant role in our global food system and is a critical source for key ingredients in basic staples like bread, infant formula and cereal.”

Cargill has said it will contribute any profits from its Russian operations to humanitarian efforts in Ukraine.

In Europe this week, Biden acknowledged growing food insecurity unleashed by the war.

“Yes, we did talk about food shortages and it’s going to be real,” Biden told reporters on Thursday after an emergency meeting on Ukraine with NATO leaders in Brussels.

Biden officials know Cargill, which operates in 70 countries, will play a key role in shipping grain and fertilizer around the world amid the fallout of Putin’s war in Ukraine, which has left governments across Europe, Africa and Asia scrambling for new sources of nutrition for millions of people and has set off new price spikes for fertilizer and food in the U.S., eight months before midterm elections.

“They’re basically too big to fail at this point,” a Biden administration official said. “And yes, I know how that sounds.”

Other Biden officials say any tax revenue from food and agribusinesses continuing to operate in Russia to the regime is minimal compared to the larger economic campaign Biden is waging. And, the officials argue, food operations and exports from the major grain producer need to continue, regardless of any revenue stream to Putin.

Activists and others, however, have questioned whether Cargill and other corporations are really doing “essential” work in Russia and have voiced concerns about propping up Putin at a time when Western countries are trying to freeze him out of the global economic system. Cargill, which has sweeping investments in the region dating back to the Soviet Union and is notoriously tight-lipped about its regular operations, declined to detail what specific facilities or products it was continuing in Russia.

But administration officials don’t want to publicly question the companies’ operations right now. Vilsack, for example, said it wouldn’t be fair to weigh in on how “essential” Cargill’s ongoing business in Russia is.

“From my experience with Cargill, I can’t speak to others, that’s a fairly hard question that you ask,” said Vilsack, adding that he recently spoke with Cargill officials as they weigh how to continue their Russian operations. “But in my dealings with the Cargill people, they’ve always been upfront, they’ve always been honest and they’ve always been straightforward. I have to tell you that they are agonizing over this.”

U.S. lawmakers who have called for U.S. companies to leave Russia are trying to navigate issues around food supplies in the country as well.

Cargill, based in suburban Minnesota, is in moderate House Democrat Dean Phillips’ competitive district, and is a major employer in the area.

Phillips was in the congressional auditorium for Zelenskyy’s address last week, when the Ukrainian president specifically urged members of Congress to “put pressure” on U.S. companies in their districts and states still operating in Russia. Phillips said in an interview that he was incredibly moved by the speech, but he didn’t believe Zelenskyy was calling for food companies to leave Russia.

“Cargill literally feeds the world, and they have committed to using any profit generated in Russia to support Ukrainian relief efforts,” Phillips said. “They believe strongly, and I concur, that this is not a time to cease food production. Rather, we have to ensure that humanitarian aid, which includes food, is available. They won’t be profiting from this war and to the contrary, they’ll be helping people survive it. And I do support that.”

Minnesota Democratic Sens. Amy Klobuchar and Tina Smith both said in interviews that they supported Cargill cutting back its Russian operations, but did not call for the company to suspend their presence there, entirely.

A company operating in Russia, like Cargill, “that is providing the raw materials for food that the whole world relies on, is a delicate balance,” Smith said. “You gotta get that right.”