German building materials manufacturer Knauf’s attempt to exit Russia collapsed after negotiations with a potential buyer broke down, the company announced on 7 October 2025. The family-owned gypsum giant first pledged to sell its Russian operations in spring 2024.
By May 2025, Knauf told German media the talks were “quite far advanced.” Now they’ve collapsed entirely.
Knauf’s continued Russian operations pump tax revenue into Moscow’s military budget. The company reported €15.6 billion ($18.4 billion) in global revenue last year with 43,500 employees worldwide.
Russian tax payments from those operations are inevitable—regardless of where Knauf claims profits end up.
The company claims no profits while operations continue
Knauf says Russian operations are managed “organizationally separate from local management” under sanctions compliance, and no profits flow to the family firm. The firm also stopped moving goods between Russia and the EU “years ago.”
But how does a €15.6 billion ($18.4 billion) global company run Russian subsidiaries at break-even or loss indefinitely?
And if “local management” is separated, who makes daily operational decisions while facilities keep running?
Building materials go where buyers want them
Knauf faces the problem every Western company staying in Russia confronts: once materials leave the factory gate, they go anywhere. The company admits it “sells almost exclusively to building materials dealers” but has “no influence on which customers they resell to.”
That admission undermines Knauf’s May 2025 denial of investigations by Der Spiegel and Danwatch, which found Russian military procurement documents requesting Knauf products for modernizing nuclear weapons facilities.
Knauf insisted it holds no defense ministry contracts—but if the company can’t track where materials go after initial sale, that denial rings hollow.
The company manufactures products locally in Russia rather than exporting from Germany. Yet Knauf’s Russian subsidiaries remain 100% owned by the German parent company.
“Very challenging environment”
Knauf described its search for exit options as happening “in a very challenging environment.” Translation: potential Russian buyers face Western sanctions, the Kremlin blocks sales to non-Russian entities, and asset seizures loom over any deal.
Knauf’s continued operations fit a pattern of Western companies maintaining a presence in Russia despite exit pledges.
Spanish fashion retailer Zara reappeared in Russian stores three months after its CEO ruled out a return. PepsiCo never left despite 2022 announcements, paying $122 million in Russian profit taxes last year.
Western companies are betting on a return to “business as usual” with Russia. Knauf’s trajectory from “quite far advanced” in May to complete failure in October shows how that bet plays out.
Kanuf says it evaluates “further possible options,” but gives no timeline or specifics.