US Sanctions Should Stop Hurting American Business

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International Paper Co, a leading US manufacturer of packaging products and cellulose fibers, had to discontinue its operations and sell its ownership interest in Russia after the US government imposed sanctions prohibiting American business activities there.

In turn, International Paper Co permanently closed its three businesses in Orange, Texas; Riegelwood, North Carolina; and Pensacola, Florida at the end of last year.

The shutdowns reduced the company's production by about 1.3 million tons (8.3%), and over 900 employees were laid off. According to news reports, the total shutdown charges amounted to some US$664 million.

According to Reuters , the sanctions-caused turbulence led to merger talks with Suzano, the largest Brazilian paper and pulp company in Latin America – although the deal did not ultimately go through. There have been no known reports of the company's production recovery or merger prospects since.

The case of Arconic Corporation is even more telling. In November 2022, the company was effectively forced to sell 100% of its Russia-based business, which commenced operations in 2007.

After the sanctions-forced divestiture, Arconic Corporation recorded a $304 million after-tax loss on the sale in the last quarter of 2022.

In May 2023, the company entered into an agreement and plan of merger to be acquired by funds managed by affiliates of Apollo Global Management, Inc, according to the Des Moines Register.

In Q1 2023, Arconic Corporation's accounts payable were $1.5 billion and its net profit dropped by almost 40% to $25 million from $42 million in 2022 quarter on quarter.

Davenport Works, Arconic Corporation's main production facility located in Iowa, had 2,400 employees in the fall of 2023.

It then ranked among the ten largest employers in the Quad Cities Metropolitan Area, which comprises Davenport and Bettendorf in Iowa and Rock Island and Moline in Illinois.

However, after the transaction closed in August 2023, Arconic Corp's shares stopped trading on the New York Stock Exchange. The company is now privately held and its production indicators are not currently open for public review.

These are just two of several big American companies that are bearing the brunt of Washington's increasingly wide-reaching sanctions regime. Small and medium-sized enterprises also face significant risks from US sanctions, which often prove fatal to their operations.

Should America's next leader opt to impose new politically motivated sanctions, American companies and their workers will feel the pain as much, if not more, than America's adversaries. And at a time when concerns are rising about the health of the wider US economy.