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Russia. The Kremlin adopts legislation to facilitate takeovers of Western companies

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Russia is planning to adopt legislation that would allow it to seize the assets of “disobedient” Western companies and make it more difficult for them to leave the country. This is in retaliation for US and European sanctions imposed after the invasion of Ukraine, the Financial Times reported.

The Kremlin last week secretly ordered legislation to seize Western assets at discounted prices and is discussing even more draconian measures to fully nationalize them, the British daily reported, citing sources familiar with the matter.

Taking over Western companies – Kremlin’s plans

According to these sources, the economic team Vladimir Putin wants the threat of nationalization to be part of the carrot and stick method to punish Western countries that seize Russian assets while rewarding those who play by the Kremlin’s rules.

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A confidential Kremlin decree seen by the Financial Times would give the Russian state the right of priority to purchase at a “considerable discount” any Western assets put up for sale. Putin’s decree signed last week also requires that all private Russian buyers of Western assets either have a fully Russian ownership structure or be in the process of removing all foreign shareholders, further complicating the exit procedure for Western companies.

Dmitry Peskova spokesman for Putin, told the FT that Western investors and companies were “more than welcome” in Russiabut some, he said, stopped paying salaries altogether or simply decided to leave the country at a huge loss. – If a company does not fulfill its obligations, then of course it falls into the category of disobedient. We say goodbye to these companies. And then what we do with their assets is our business,” Peskov said.

Previous reflections on nationalization

“FT” writes that Putin’s entourage has been debating the nationalization of Western companies since Russia invaded Ukraine last year, but so far such powers have only been used sporadically. In April, Russia took over local subsidiaries of Finland’s Fortum and Germany’s Uniper in response to what it called the “illegal expropriation of Russian assets abroad.” The Kremlin’s decree concerned only these two companies.

The newspaper explains that in deciding to extend such powers to thousands of Western groups, the Kremlin will monitor what happens to the approximately $324 billion of Russian central bank assets frozen in the West. Russian economic officials fear losing the key role Western companies continue to play in many sectors of the country’s economy. The Kremlin also wants to find new sources of revenue for the budget in the face of declining energy export revenues and soaring military spending, which has caused an increase in budget deficit to $42 billion this year.

Main photo source: Mikhail Gerasimov/Shutterstock

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