Goodbye, American soft power: McDonalds exiting Russia after 32 years is the end of an era – CNBC

Soviet customers stand in line outside the just opened first McDonald's in the Soviet Union on January 31, 1990 at Moscow's Pushkin Square.

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It was 4 a.m. and a trickle of Russians had already begun lining up outside the building in the freezing winter cold, hours before opening time.

When the doors opened, hundreds of hungry, bundled-up Muscovites rushed in for their first-ever taste of this alien creation: the Big Mac.

It was January of 1990 and McDonalds was opening its very first restaurant in the Soviet Union, becoming one of the few Western companies to breach the Iron Curtain in its final days as it slowly opened up to the world.

At that time, Russians were hungry. In the literal sense. Stores frequently ran out of food and lacked most of the products that existed in the Western world. A meal at McDonald's cost half a days' wages, but "it's unusual and delicious," one local woman told a CBC News reporter at the opening, after trying her first burger.

"We are all hungry in this city," the woman said. "We need more of these places there is nothing in our stores or restaurants." The McDonald's ended up having to stay open several hours past its official closing time due to the high demand, and served a whopping 30,000 customers on its opening day a record for the iconic American chain.

Of course, in the 32 years since, Russia has become a capitalist haven, replete with thousands of recognizable Western brands and foreign investment. But in the weeks following Russian President Vladimir Putin's invasion of its neighbor Ukraine and amid global condemnation, most of these brands have shut their doors, either closing temporarily or vacating the country entirely.

So the scenes from 1990 have almost repeated themselves three decades later, albeit in a very different context. When McDonald's announced the temporary closing of its more than 800 restaurants in Russia in early March, before this week's decision to exit the country permanently, long lines were seen outside its facilities as Russians came to get what could be their last-ever golden-arched burgers and fries.

One Russian man even handcuffed himself to the door of a Moscow McDonald's in protest, shouting "Closing down is an act of hostility against me and my fellow citizens!" before being arrested.

For Bakhti Nishanov, a Eurasia specialist who grew up in the Soviet Union, the departure is oddly emotional.

"It's truly weird how this hits me. It's almost like hope leaving the country," he told CNBC.

"This has a massive symbolic importance: McDonald's coming to Russia, then part of the Soviet Union, was an implicit signal to the world that Russia is open for business. The company leaving Russia is an explicit signal that the country is no longer a place you want to be in as a business," Nishanov said.

People wait in line to enter a McDonald's restaurant in Moscow on March 11, 2022, after the chain announced it was temporarily closing its 850 restaurants in Russia, joining other foreign brands that have been suspending operations in Russia following the country's military campaign in neighboring Ukraine. McDonald's has since decided to exit Russia permanently.

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"I first read about the McDonald's in Russia in a youth magazine called Yunniy Tehnik," Nishanov recounted. "I was absolutely mesmerized and fascinated by the article and the idea that one, for a relatively modest amount of money, can too be part of the American culture that McDonald's was a tangible representation of."

"To a generation of Russians, McDonald's commonly referred to as MakDak was a fascinating phenomenon," he added. "Clearly connected to the American culture, yet very much part of their daily lives and, in a way, less foreign or alien than many other brands."

Economically, too, the departure is significant McDonald's employs 62,000 people across Russia. With the hundreds of other foreign companies that have left the country, the number of jobs that have disappeared is estimated in the hundreds of thousands.

The burger chain will now sell its business, which included some 847 restaurants, saying that the "humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald's to conclude that continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald's values."

The logo of the closed McDonald's restaurant in the Aviapark shopping center in Moscow, Russia, March 18, 2022.

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CEO Chris Kempczinski said he was proud of all of the company's workers employed in Russia and that the decision was "extremely difficult." He also said that the employees will continue to be paid until the business is sold and that "employees have future employment with any potential buyer."

Shoppers look towards closed McDonald's and KFC restaurants at the Mega Mall, in Khimki, outside of Moscow, Russia on March 27, 2022.

Konstantin Zavrazhin | Getty Images

McDonald's write-off from exiting Russia will be between $1.2 billion to $1.4 billion, the company said. Just closing its restaurants for the first few weeks in Russia had hit its earnings significantly, costing it $127 million last quarter. Together with its 108 restaurants in Ukraine, Russian and Ukrainian business made up about 9% of McDonald's revenue in 2021.

Politically, the golden arches also went a long way, says Tricia Starks, a professor of history at the University of Arkansas and author of the forthcoming book "Cigarettes and Soviets."

"The American way of consumption was a crucial soft-diplomacy front in the Cold War acquainting the Soviets with America's material standards was another field of battle," Starks said. A few other brands took on this role in the USSR before McDonald's did, namely Pepsi in 1972 and Marlboro in 1976.

A Soviet policeman stands by a queue of people waiting to enter a newly opened McDonald's on Gorky Street in Moscow in 1990.

Peter Turnley | Corbis Historical | Getty Images

But McDonalds, unlike a can of Pepsi or a pack of Marlboro cigarettes, "was a totally immersive experience of capitalism's sensual joys," she said.

"From the moment you stepped in, it was an entirely different experience than a Soviet restaurant. You were greeted with smiles and shouts of 'Can I help you?' Products were of consistent quality and always consumable. The burgers were hot!"

This was a culture shock to Soviet denizens, many of whom expressed confusion when staff would smile at them. "When I smile, people are asking what's wrong, they think I am laughing at them," one Russian employee at the McDonald's opening day in 1990 told a reporter.

Traditionally dressed Russian musicians perform in front of the then-busiest McDonald's restaurant in the world in Pushkin Square in Moscow during the 15th anniversary of the opening of its first restaurant in Russia on January 31, 2005.

ALEXANDER MEMENOV | AFP | Getty Images

"When you were done, a worker would come and whisk away the trash, and the showplace on Pushkin Square was kept clean despite the thousands who would come by through the day some of them waiting hours to spend a full month's wages on dinner for a family of four," Starks described, noting that customer service was simply not a concept in the USSR. "Service was a side product of a McDonald's experience."

Not all Russians feel bad about the golden arches leaving.

"Hello Americans We want to thank you for all your sanctions, for taking away from our country Coca Cola, KFC, McDonald's and all that sh--. Now by summer we will be healthy, strong and without ass fat," Russian influencer and comedian Natasha Krasnova wrote in an Instagram post in March that was viewed more than 5 million times.

A mobile fast food van is seen in Moscow, Russia, as people buy alternative fast food after McDonald's closed its roughly 850 restaurants across the country. March 21, 2022.

Sefa Karacan | Anadolu Agency | Getty Images

Many Russians have encouraged replacing Western chains with Russian-made brands, and at this point are perfectly capable of making their own burgers and other fast food products. There has also been a push by some to ditch American-style food as a whole in favor of local dishes, as much of the country rejects Western symbols out of patriotism.

A view of McDonald's restaurant serving in Murmansk, Russia, the northernmost city in the world, on March 11 2022, after the chain said it would temporarily close all of its 850 restaurants in Russia in response to the country's invasion of Ukraine. In May, it announced its permanent exit from Russia.

Semen Vasileyevy | Anadolu Agency | Getty Images

Many Russians feel bitter about having to deal with the consequences of a war they did not choose. Those consequences pale in comparison to the horror being dealt to Ukraine, where thousands of civilians have been killed by Russian bombs and numerous cities reduced to rubble.

But as the war rumbles on and Russia becomes increasingly isolated by international sanctions, time will tell how many Russians will abandon their country in pursuit of the more open world they knew, and how many will choose allegiance to the state, turning against that world.

For Nishanov, it's not just about McDonald's, but something bigger.

"McDonald's leaving Russia hits many of my generation differently," he said, "I think because it represented and I know this sounds dramatic hope and optimism. The company leaving confirms Putin's Russia is a place devoid of those two things."

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Goodbye, American soft power: McDonalds exiting Russia after 32 years is the end of an era - CNBC