“Russia has plundered its territory.” The confiscation of assets made it “utterly dangerous” for investors

By waging war, Russia is destroying everything it has achieved in the last 20-30 years. Once upon a time, Vladimir Putin invited foreign investors to the country and pursued an economic policy that made it possible to create a modern car industry in the country, attract leading oil and energy companies, all the largest auditing and consulting companies, world leaders in the consumer, food and other sectors.

But after Putin’s virtual confiscation of Carlsberg and Danone’s assets, Russia has become a “completely dangerous” country for foreign investors, the European External Action Service (the EU’s diplomatic agency dealing with foreign relations, the EU’s security and defense policy) has warned.

Putin’s decree was “further evidence of Russia’s disregard for international law and regulation”, this time targeting “the economic interests of foreign companies legally operating in Russia,” Foreign Ministry spokesman Peter Stano told EUobserver:

Not only is Russia plundering Ukraine, it is now illegally depriving owners of control of their property on Russian territory.

The change of leadership at Baltica Brewing Company took place without the participation or approval of Carlsberg Group, the Danish company that owns it, she said on Wednesday. “Carlsberg no longer controls Baltica’s management or operations,” she said in a statement. – For Carlsberg, it is not clear how this will affect Baltica’s operations in Russia, as well as the ongoing process [ее] turnover”. Danon has not issued any official announcements.

Both Carlsberg and Danone intended to leave Russia, were looking for buyers for their assets, and were close to an agreement. Carlsberg announced in June that it had reached an agreement (but did not name a buyer), Danone was days away from completing the sale. But the assets attracted people from the inner circle of Putin and his associates, the Financial Times reported a day earlier, citing several sources. So the Kovalchuk brothers, close friends of the president, looked at Baltica. Agriculture Minister Dmitry Patrushev (son of Security Council Secretary Nikolai Patrushev, a longtime ally of Putin) and businessmen close to Chechnya’s leader Ramzan Kadyrov wanted to take over Danone.

The Baltic was headed by Putin’s close friend, Taimuraz Bolloev, and Danone by Kadyrov’s nephew, Jakub Zakriev, deputy prime minister and minister of agriculture of Chechnya.

Until recently, by historical standards, Russia was considered an attractive country for investment. The rapid development of the economy, institutional reforms, high level of education of the population, favorable development prospects forced foreign companies to open offices and factories, create jobs and invest hundreds of billions of dollars. Foreign direct investment in Russia in 2000-2021 amounted to $651 billion (some of these measures, however, involve reinvesting Russian business through controlled Cypriot and other companies).

The investment record, according to the Central Bank, was set in 2008 – USD 74.8 billion was invested in the country. After the recession caused by the global financial crisis, operations resumed, and in 2013, the last pre-war year, Russia attracted $69.2 billion. In 2019, the epidemic amounted to USD 30 billion.

In April 2023, Putin, by his decree, transferred to the Federal Asset Management Agency the shares of German Uniper and Finnish Fortum in their Russian subsidiaries Unipro and Fortum, respectively, for interim management. The move, the document said, was taken “in response to unfriendly and unlawful actions” by the United States and its allies. Last year, Germany took control of Gazprom and Rosneft, but this happened during the energy crisis under the Security Act.

Putin’s current decision shows that Moscow “can now take assets from foreigners and distribute them to people close to the regime,” said Alexandra Prokopenko, a visiting fellow at the Carnegie Berlin Center for Russian and Eurasian Studies and a former adviser to the Bank of Russia.

Now any Western company operating in Russia could fall under state control, Philip Medunich, an expert on Russia at the European Council on Foreign Relations, told EUobserver. “This is a full-fledged nationalization of foreign assets in a country whose economy is in trouble and is now slowly sinking,” added Lukas Andriukaitis, an expert on Russia at the Atlantic Council.

More than 1,000 foreign companies have announced they are leaving Russia, but many are still operating or trying to sell their assets. However, the authorities consistently complicate this process, limiting the possibilities of exiting the business. Transactions are possible only with the approval of a special government commission, and the sale discount must be at least 50% of the market value. If the transaction is carried out with a discount of less than 90% of the market value, you have to pay compensation to the budget – 10%. At the same time, owners from hostile countries are forbidden to withdraw funds from sales abroad. There are a number of other limitations.

According to Stano, Putin’s decree on Carlsberg and Danone –

a very clear signal to any external trade and business partners or investors, if any, about the state of the rule of law in Russia makes it completely uncertain and economically unpredictable.

Putin now accuses other countries of being technologically dependent on Russia. They were the ones who “were literally trying to hook our country by any means” to their technology platforms and standards, he said a week ago.


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