I'd expect them to predict this problem and design a system where it's not a problem. They'd specifically built a system that allows them to do this

Then Google employees would start getting arrested, and whatever would be left of Google in the country would comply anyway, achieving nothing but the imprisonment of more people. Google Russia's employees don't have diplomatic immunity.

How long would other western companies continue doing business in Russia if that started happening?

The most profitable choice for them is to stay in Russia and obey the government. They have no reason to leave or risk getting the same treatment as Google by disobeying.

As long as it continued to be profitable, obviously.

> they do not remove "illegal" YouTube videos yet

They don't? They do "remove" them in Germany, though it's typically enough to set your location to outside Germany, they're not strongly geo-fenced. I assume they do similar things in Russia. They don't need to remove them globally to be compliant with local laws, as those laws typically end at the border of the nation they're operating in.