Russia plans to seize assets of Western companies exiting the country | Russia
Russia has drawn up plans to seize the assets of Western companies leaving the country as the Kremlin pushes back on sweeping sanctions and the exodus of international companies since its invasion of Ukraine.
Announcing the move after a series of global companies said they would suspend operations in Russia this week, including McDonald’s, Coca-Cola and Pepsi, the country’s economy ministry said it could temporarily take control of outbound companies where foreign ownership exceeds 25%.
Speaking in a video link to members of his government on Thursday, Vladimir Putin said the Kremlin could find legally viable ways to seize international companies. The government would push to “introduce external management and then transfer these companies to those who really want to work,” Putin said. “There are enough legal and market instruments for that.”
Mikhail Mishustin, Russia’s prime minister, said while most companies had temporarily suspended operations, the situation would be closely monitored and measures to “introduce external administration” could be used.
The move comes as Western governments seek to impose maximum pressure on Putin following the invasion of Ukraine by announcing drastic restrictions on Russian oil and gas imports in addition to financial sanctions and asset freezes for leading oligarchs.
In addition to official sanctions, major Western companies and high-profile brands have taken steps to leave the country altogether or suspend operations in response to the invasion, including Starbucks and McDonald’s. Shell announced its intention to withdraw from Russian oil and gas, BP said it would withdraw stakes in major projects, while Unilever said it would stop imports and exports to the country.
Burger King announced on Thursday that it would suspend all business support for the Russian market, including operations, marketing and supply chain. The company does not directly operate restaurants in the country, instead being managed by local franchise partners.
Describing the Kremlin’s response to its growing international isolation, Dmitry Medvedev, the former Russian president, said he was using a “symmetrical response” to Western-imposed sanctions, “including the seizure of foreign assets and their eventual nationalization.
“The same goes for the refusal of foreign companies to work in our country,” he wrote in a post on the social media site VKontakte, accusing Western companies leaving the country of being “dumb for having danced to the tune of Washington and Brussels”.
He said Moscow would respond “fundamentally and harshly” to the departures, adding: “Whatever the reasons for the exodus, foreign companies must understand that it will not be easy to return to our market.”
Russia on Thursday announced plans to exert pressure on the West through economic sanctions, including an export ban on timber, electronic equipment and telecommunications.
Moscow has also passed laws to seize $10bn (£7.6bn) of planes leased to Aeroflot and other Russian airlines by Western organisations.
It comes as Russia moves closer to defaulting on public debt, with ratings agencies warning of an “imminent” failure in a move that could lead to financial losses for Russian sovereign bondholders.
World Bank chief economist Carmen Reinhart said on Thursday that Russia and Belarus were “in default territory” in an interview with Reuters. Fitch further downgraded Russia’s sovereign rating to junk status earlier this week, warning that the government was increasingly likely to backtrack on payment commitments.
Russia is due to make payments worth about $117 million on US dollar-denominated government borrowings on Wednesday next week. However, doubts have been raised over whether the coupon payments will be made amid Western sanctions against Russia’s central bank and commercial lenders, as well as retaliatory measures announced by Moscow.
Reinhart said the impact on the global financial system had been limited so far, although she warned that risks could emerge in Europe. About half of Russia’s international bonds are held by foreign investors. Foreign banks have more than $121 billion in exposure to Russia, much of it concentrated among European lenders, according to data from the Bank for International Settlements.
“I worry about what I don’t see,” Reinhart said. “Financial institutions are well capitalized, but balance sheets are often opaque… There is the problem of Russian private sector defaults. We cannot be complacent.