Moscow is browbeating foreign firms by seizing their assets in Russia.
Russian president Vladimir Putin signed a decree late Tuesday (April 24) that lets the Kremlin introduce “temporary” state control over the assets of companies or individuals from “unfriendly” states, including the the US and its allies, which make or threaten to make similar moves.
The decree is a signal of caution to the West, and in particular to the European Union, which is discussing whether frozen Russian assets should be used in the reconstruction of Ukraine.
For the first time during the ongoing Ukraine war, Russia put utilities owned by two firms—Finland’s Fortum Oyj and its former Germany subsidiary Uniper (which was rescued by the German state last year to prevent its collapse)—under state control.
The Kremlin has long threatened to nationalize the assets of companies that leave Russia—especially after Germany took over and nationalized the local arm of Russia’s oil giant Rosneft and natural gas producer Gazprom.
Both Uniper and Fortum have tried to offload their Russia stakes since the war began. But Russia has not allowed it, owing to a decree that prohibits Western investors from selling their stakes in Russian businesses that involve the production and supply of heat and electricity without special permission from the President. Now their stakes in these utilities are untouched, but Fortum and Uniper cannot exercise much control over them.
Quotable: The Russian state will make management decisions
“External management is temporary and it means that the original owner no longer has the right to make management decisions. The external manager receives powers that allow it to guarantee the efficiency of businesses based on their importance for the Russian economy.”
— The Federal Agency for State Property Management today (April 26)
By the digits: Uniper and Fortum in Russia
83.73%: Uniper’s stake in Unipro PJSC, which operates five power plants in Russia and employs around 4,300 people
98.2%: Fortum’s stake in Fortum PJSC, which has seven thermal power plants in the Ural region and western Siberia. It also boasts of a 3.4 gigawatt wind and solar portfolio. “Fortum’s current understanding is that the new decree does not affect the title (registered ownership) of the assets and companies in Russia,” the company said in a statement. “However, it remains unclear how this affects e.g. Fortum’s Russian operations or the ongoing divestment process.”
1.7 billion euros ($1.87 billion): Fortum’s total impairment charges related to its Russian operations
4.4 billion euros ($4.8 billion): The Loss that Uniper booked on its Russian unit earlier this year, saying it was no longer in control of operations at its subsidiary
Company of interest: Wintershall Dea
Mario Mehren, the CEO of Wintershall Dea, a European oil and gas company in the middle of exiting Russia, told reporters during the company’s first-quarter 2023 earnings call that Wintershall remains unaffected for now but also warned that Russia’s policies are “unpredictable” and “unreliable.”
“I can’t tell you if it is going to happen. Everything can happen in Russia these days in terms of direct interference with our rights to our assets,” Mehren added.
Person of interest: Andrey Kostin
Andrey Kostin, the CEO of the state-owned bank VTB PAO, suggested on Monday (April 24), that Moscow take over the assets of foreign companies in Russia, and only return them when sanctions over the war in Ukraine are lifted. In the interview broadcast on the Rossiya-24 television channel, he specifically cited Fortum as an example.
Why is Russia retaliating now?
Recently, news emerged that the Group of Seven (G7) countries are possibly weighing a near-total ban on exports to Russia, extending existing sanctions as a penalty for Moscow’s refusal to call off its Ukrainian invasion. Already, products used for military purposes and luxury goods have been banned. Now the economic powers could include used cars, tires, cosmetic items, and clothing in the trade embargo, an anonymous source told the Japan Times.
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