May 25, 2024

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Russia plans to seize the assets of Western companies that withdraw | Russia

Russia has drawn up plans to confiscate the assets of Western companies leaving the country as the Kremlin resists sweeping sanctions and international corporate exodus since the invasion of Ukraine.

The move was announced after a string of global companies said they would suspend their operations in Russia this week, Including McDonald’s, Coca-Cola and PepsiThe country’s economy ministry said it could take temporary control of leaving companies as foreign ownership exceeds 25%.

Speaking via a video link with members of his cabinet on Thursday, Vladimir Putin said the Kremlin may find legally viable ways to seize international companies. Putin said the government would push for “the introduction of an external administration and then the transfer of these companies to those who really want to work.” “There are enough legal and market tools for this.”

Mikhail Mishustin, Russia’s prime minister, said that while most companies have temporarily suspended operations, the situation will be closely monitored and steps to “enter an external management” can be used.

The move comes as Western governments seek to put maximum pressure on Putin after the invasion of Ukraine through the declaration Strict restrictions on imports of Russian oil and gas On top of financial penalties and Freezing the assets of the eminent oligarchy.

In addition to the official sanctions, the major Western companies and Notable brands have taken steps to either exit the country completely or suspend operations In response to the invasion, including Starbucks and McDonald’s. Shell announced its plans to withdraw from Russian oil and gasBP said it would exit its stakes in major projects, while Unilever said it would halt imports and exports to the country.

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burger king announced on Thursday It will suspend all of its institutional support for the Russian market, including operations, marketing and supply chain. The company does not operate restaurants directly in the country, with the brand instead being operated by local franchise partners.

Summing up the Kremlin’s response to its growing international isolation, former Russian president Dmitry Medvedev said it is using a “consistent response” to Western-imposed sanctions, “including the expropriation and possible nationalization of foreign assets.”

“The same applies to the refusal of foreign companies to work in our country,” he wrote in a post on the social networking site VKontakte, accusing Western companies leaving the country of being “stupid for dancing to the tunes of Washington and Brussels.”

He said Moscow would respond “basically and harshly” to the departures, adding: “Whatever the reasons for mass migration, foreign companies must understand that it will not be easy to return to our market.”

Russia on Thursday announced plans aimed at putting pressure on the West through economic sanctions, including through export ban On wood, electronic devices and communications.

Moscow has also passed laws to seize $10 billion (£7.6 billion) of aircraft leased to Aeroflot and other Russian airlines by Western organisations.

It comes as Russia is close to defaulting on government debt, with rating agencies warning of an “imminent” failure in a move that could lead to financial losses for holders of Russian sovereign bonds.

The World Bank’s chief economist, Carmen Reinhart, said on Thursday that both Russia and Belarus were “square in the hypothetical region” in an interview with Reuters. Fitch lowered Russia’s sovereign rating to “junk” earlier this week, warning that the government is increasingly likely to back down on its payment commitments.

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Russia is due to make payments of about $117 million on government borrowing in US dollars on Wednesday next week. However, doubts have been raised about whether the coupon payments will take place amid Western sanctions on the Russian Central Bank and commercial lenders, as well as retaliatory steps announced by Moscow.

Reinhart said the impact on the global financial system has so far been limited, although she cautioned that risks could arise in it Europe. About half of Russia’s international bonds are owned by foreign investors. Foreign banks have exposures of more than $121 billion in Russia, and much of that is concentrated among European lenders, according to data from the Bank for International Settlements.

“I’m worried about what I don’t see,” Reinhart said. “Financial institutions are well capitalized, but balance sheets are often opaque … There is an issue of Russian private sector default. One cannot be complacent.”