As companies leave Russia, their assets could be seized | Economic news

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The “Evropeisky” shopping center in Moscow was once a symbol of a Russia integrated into the global consumer economy, with atriums named after cities including London, Paris and Rome.

But now large parts of the seven-story mall have fallen silent after Western brands from Apple to Victoria’s Secret shut down their Russian operations within two weeks of the country’s invasion of Ukraine.

Hundreds of companies have also announced plans to cut ties with Russia, the pace accelerating over the past week as the deadly violence and humanitarian crisis in Ukraine worsens and Western governments step up security measures. economic sanctions.

Russian President Vladimir Putin responded on Thursday by saying that if foreign companies shut down production in Russia, he favored a plan to “bring in outside direction and then hand over those companies to those who want to work.”

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A bill could allow Russian courts to appoint outside administrators for companies that go out of business and are at least 25% foreign-owned. If the owners refuse to resume operations or sell, the company’s shares could be auctioned off, the ruling United Russia party said, calling it a “first step towards nationalization”.

Chris Weafer of Macro-Advisory, a consultancy firm specializing in Russia, said the Russian government is “taking a carrot and stick approach to foreign companies”, with talks of nationalization being offset by government aid for those who stay. A key reason, Weafer said, is the Kremlin’s desire to avoid mass unemployment.

“As far as social pressures or potential public backlash, what they understand, I guess, is that people aren’t going to take to the streets because they can’t buy a Big Mac,” he said. said Weafer. “But they might take to the streets if they don’t have a job or an income.”

White House press secretary Jen Psaki criticized “any anarchic move by Russia to seize the assets of these companies”, saying it would “ultimately cause even more economic suffering for Russia”. .

“This will reinforce 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 could also invite companies whose assets are seized to take legal action”.

Even before its latest invasion of Ukraine, Russia was already trying to domesticate its food supply following the sanctions it imposed on the European Union in 2014. With little or no fresh food imported from these trading partners , Russia has placed more emphasis on domestic food and import. more friendly countries like Turkey.

Companies like French food giant Danone, which is suspending investment in Russia but continuing production there, are “essentially Russian companies” with local staff and supply chains and can operate more or less autonomously. compared to foreign owners, Weafer said.

But keeping businesses operating in Russia — even with government intervention — won’t be easy. Indeed, the conditions that drove foreign companies to leave Russia are still in place: international sanctions, supply chain disruption and pressure from customers in Europe and North America.

The auto industry has been particularly hard hit by its reliance on foreign-made electronics. Even companies that have remained in Russia like French automaker Renault, majority owner of Russian automaker Avtovaz, have had to temporarily halt production.

Without imports, companies like furniture maker Ikea or many fashion retailers cannot operate and will likely have to exit the Russian market altogether, Weafer said.

Some foreign companies suspending operations in Russia, such as McDonald’s and cigarette producer Imperial Brands, have been keen to say they will continue to pay staff even while their workplaces are closed. This can’t last forever, and Weafer predicts that companies will have to decide by the end of the summer whether to resume operations or leave altogether.

One voice opposing the confiscation of foreign corporate assets is billionaire metals tycoon Vladimir Potanin, who compared it to the Russian Revolution of 1917, when the communists took power.

“It would set us back 100 years to 1917 and the consequences of a step like this – global investor mistrust of Russia – would be felt by us for many decades,” he said in a statement Thursday. on his company’s social networks. , Nornickel.

Follow AP’s coverage of the Ukraine crisis at https://apnews.com/hub/russia-ukraine

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