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Foreign Companies Exiting Russia Will Have Their Assets Seized, Warns Putin


14/03/2022


Foreign Companies Exiting Russia Will Have Their Assets Seized, Warns Putin
Russian integration into the global consumer economy was believed to be symbolized by the “Evropeisky” mall in Moscow as its atriums were named after cities such as London, Paris and Rome.
 
But, in the two weeks since Russia invaded Ukraine, major sections of the seven-story retail mall have gone silent, with Western firms ranging from Apple to Victoria's Secret shuttering their Russian operations.
 
Hundreds of corporations have declared similar intentions to cut relations with Russia, with the pace picking up in the last week as the deadly conflict and humanitarian catastrophe in Ukraine deepens and Western countries tighten economic sanctions.
 
Russian President Vladimir Putin has warned that if Western companies choose to stop their businesses in Russia, he would favour a plan to “bring in outside management and then transfer these companies to those who want to work.”
 
A new bill might allow Russian courts to appoint external administrators for enterprises that halt operations and are controlled by at least 25% foreigners. The company's shares might be auctioned off if the owners refuse to resume operations or sell, according to the ruling United Russia party, which described it as "the first step toward nationalisation."
 
The Russian government is "adopting a carrot-and-stick strategy to international business," according to Chris Weafer of Macro-Advisory, a consulting firm specialised in Russia, with talk of nationalisation balanced out by government assistance for those who stay. The Kremlin's aim to avert mass unemployment, according to Weafer, is a major factor.
 
“When it comes to social pressures or potential public backlash, what they understand, I guess, is that people will not take to the streets because they cannot buy a Big Mac,” Weafer said. “But they might take to the streets if they have no job and no income.”
 
White House press secretary Jen Psaki criticized “any lawless decision by Russia to seize the assets of these companies,” saying that it “will ultimately result in even more economic pain for Russia.”
 
“It will compound the clear message to the global business community that Russia is not a safe place to invest and do business,” she said in a tweet, adding that ”Russia may also invite legal claims from companies whose property is seized.”
 
Following restrictions imposed on the European Union in 2014, Russia was already attempting to domesticize its food supply before to its new invasion of Ukraine. With little to no fresh food coming from those trading partners, Russia shifted its attention to indigenous food and purchasing from more friendly nations such as Turkey.
 
Enterprises like Danone, a French food giant that is delaying capital investment but maintaining manufacturing in Russia, are "basically Russian companies" with local workers and supply networks that can operate independently of their foreign owners, according to Weafer.
 
However, even with government help, keeping firms afloat in Russia would be difficult. That's because the factors that drove foreign firms out of Russia remain in place: international sanctions, supply chain disruption, and pressure from European and North American clients.
 
Because of its reliance on foreign-made electronics, the car sector has been particularly heavily hurt. Even corporations that have remained in Russia, such as Renault, the majority owner of Russian automaker Avtovaz, have had to temporarily halt manufacturing.
 
Businesses like Ikea and many fashion stores would be unable to operate without imports, and would be forced to exit the Russian market entirely, according to Weafer.
 
Some multinational corporations halting operations in Russia, such as McDonald's and cigarette manufacturer Imperial Brands, have stated that employees will be paid even if their offices are shuttered. That can't stay forever, and according to Weafer, firms will have to decide whether to restart operations or depart totally by the end of the summer.
 
Billionaire metals mogul Vladimir Potanin, who compared it to the Russian Revolution of 1917, when Communists won control, is one of many speaking out against taking foreign corporations' assets.
 
“It would set us back 100 years to 1917 and the consequences of a step like this one — global distrust in Russia by investors — would be felt by us for many decades,” he said in a statement Thursday on the social media of his company, Nornickel.
 
(Source:www.economictimes.com)