Gov. Baker wants to cut ties with Russian state-owned companies. Will it work?

Since Russia's invasion of Ukraine, many Americans have been distancing themselves from Russian businesses, including Massachusetts' state government. Mike Deehan, GBH News State House Reporter, joined hosts Paris Alston and Jeremy Siegel on Morning Edition to discuss efforts to pull Massachusetts money out of Russia. This interview has been edited for clarity and length.

Jeremy Siegel: So, Mike, last Thursday, Gov. Charlie Baker ordered all the executive agencies to review their contracts with outside vendors and to terminate any links to Russian state-owned companies. What does that actually mean for the commonwealth?

Mike Deehan: Baker started off this letter that accompanied the order calling the invasion, first of all, brutal and unjustified. So he's not mincing words, and this is what we're seeing from a lot of governors — pretty much every step of U.S. government, even down to the states, are condemning Putin's actions in Ukraine.

What the order does is instruct A&F Secretary Heffernan, who is Baker's chief budget guy, to review all the contracts the state does business with and to determine if there are any Russian connections. And then further, to see if those are connected to the Russian state, specifically its contracting with any Russian state-owned company or otherwise engaged in any part in affiliation with Russian state-owned companies. So this is really trying to target anything that could help the Kremlin, help the country, rather than private individuals.

In the same order, Baker wants independent agencies like universities and agencies that he doesn't have direct control under to go through the same kind of process to determine whether or not they're spending money and if Russia is profiting from it.

Paris Alston: So does that mean no Russian businesses at all are going to have financial ties to Massachusetts from now on?

Deehan: No — it's specifically just those state-owned business interests that Baker is targeting, which makes this so complicated. You can't just blanket say "no more Russia." Because of course, Massachusetts and the United States has a big Russian American population. It does a lot of business with private entities in Russia. Not all of them are oligarchs. Not all of them are tied to Putin. So it is kind of tricky to isolate and identify those different contracts they might have.

So Baker said last week he doesn't want to shut down companies from Russian immigrants who run businesses here or send money home, that kind of thing. He's been careful about who does get cut off. It doesn't do any good to harm Russian Americans or maybe a Russian restaurant or import business here that isn't in any way connected to the state.

Siegel: Let's talk about the state's pension fund, the investments made on behalf of state workers that pays for retiree benefits. That's over $100 billion in all. Is any of that fund tied up in Russian state-owned businesses?

Deehan: Yeah, there's a bit. According to Treasurer Deborah Goldberg, about $104 million of that fund is tied up with Russian companies. So that's a significant amount. It's a drop in the bucket of $100 billion, but it's still a lot for the state's money. Last week, 58 lawmakers, both Democrats and Republicans, immediately called on Goldberg to divest from the Russian-connected companies that were involved in the pension fund. The thing is, the treasurer can't do that. She needs legislative approval to do that. So this is a great example of, you know, lawmakers are great at writing letters, demanding things get done until it's turned around and they know that's their job to do it first.

So now there actually is a bill, actually more than one bill, working its way through the process — one from Republican leadership, one from a Democrat. If either of these bills or the concepts in these bills, become law — and really, who knows if they're going to become law because we're entering kind of the high season of legislative chicanery here — then once they authorize that the treasurer, Deb Goldberg, could make those legal changes and drop the Russian companies from the pension fund.

Alston: Mike, what other, if any, actions might lawmakers be looking to make to punish Russia for what they're doing in Ukraine?

Deehan: There are some other bills kind of floating around that have been filed in the last week or so. There's one bill that actually prohibits the purchase or consumption of any product made in Russia. So that is far more of a hard line, that really is targeting imports into the United States. That's from Representative Patrick Kearney from the South Shore, Scituate, Marshfield area. And that would really be a clear line regardless of the product's connection to Putin or the Russian state at all. It means pretty much everything: imports, gifts, duty free, all of the above, including vodka, would probably be the biggest Russian product that we see a lot of rebranding and scrambling on — vodka companies trying to distance themselves from things. If something like that were to go into effect to become law, we could see Russian vodka becoming similar to what a Cuban cigar was for generations.

Siegel: Well, is there concern with something like that that it would go too far, not just be punishing the Kremlin for what's happening in Ukraine, but if it's across the board that you would be punishing Russian citizens who might themselves be protesting the actions of the military?

Deehan: Yes, and I definitely think that lawmakers and legislative leaders especially have that in mind. So if you're looking at what could get passed into law here in Massachusetts, it might be these more targeted economic fiscal-type bills of who we contract with and less about imports and exports and consumer products.

Alston: Mike, do you think that we can afford to stick with this for the long run? I mean, depending on how long this conflict goes, can Massachusetts afford to terminate these contracts for that period of time?

Deehan: It's a good question. I think that they probably can, and there are probably other contracts that would be very eager to pick up the work. And it's going to be kind of messy, though, and there will be a cost to switch over and things like that.

One thing that was pointed out that with the pension investments, the Russian stock market is in kind of shambles and frozen at the moment. You can't divest from Russia because you can't sell off those stocks. So there are a lot of complications. There's a lot going through here. A lot of it's symbolic right now. It's kind of the height of this war. But there will definitely be some long-term ramifications if we do take a significant amount of Massachusetts money out of that Russian economy.