President Vladimir Putin’s administration has been making it harder to exit the Russian market.
GAVRIIL GRIGOROV/SPUTNIK/AFP via Getty Images
The Kremlin could pass a new rule allowing it priority rights to acquire shares from exiting foreign firms.
This would make it harder for foreign companies to leave the Russian market.
Moscow has been imposing an increasing number of restrictions on firms that want to exit the country.
Foreign businesses wanting to leave the Russian market already face a tough time trying to get out — but a new law could make the breakup even harder.
Russia is in the process of approving a new rule that allows the Kremlin to be the first in line to acquire the shares of strategic companies whose foreign shareholders are leaving the country, Interfax news agency reported on Monday.
Companies in the Kremlin’s list of 200 strategic enterprises include food giant Danone and Finnish energy firm Fortum, per the Moscow Times. The Russian operations of both companies have been seized by Moscow this year. The Financial Times reported that Russian President Vladimir Putin ordered the seizure after people close to his regime expressed interest in the assets.
Russia’s preferential right to acquire shares is “realized regardless of the preferential rights of other persons,” according to a Moscow Times translation of the draft document obtained by Interfax. Russia’s finance ministry confirmed the draft decree to the news agency on Monday.
The “super priority” rights, as translated by the Moscow Times, supersedes the rights of others who may also be entitled to the shares of the exiting foreign shareholders.
Despite 1,000 companies announcing they were voluntarily cutting back on operations merely two months after the Ukraine war started in February 2022, just 529 foreign companies have made a clean break with the country, according to an ongoing study from Yale University, which was last updated on July 18.
But it’s not for lack of trying: More than 2,000 companies were seeking approval to exit the Russian market, the Financial Times reported in March, but the progress has been slow due to logistical delays, among other reasons.
President Vladimir Putin’s regime has also been imposing an increasing number of punitive measures on companies exiting the Russian market.
In December 2022, Russia started forcing those companies selling their assets to dispose of them at a 50% discount. This has benefited Russian businessmen who bought the assets of 110 Western companies “that have fully or partially left Russia” at bargain-bin prices, independent Russian newspaper Novaya Gazeta reported last Thursday. These assets were collectively valued at 35 billion euros, or nearly $40 billion, at the end of 2022, per the report.
Moscow also charges exiting companies an exit fee of at least 10% of the sale value. In addition, the Russian government started requiring sellers from “unfriendly countries” to donate at least 10% of the sale proceeds to the Russian budget from March 2023.
The Russian finance ministry did not immediately respond to a request from Insider for comment.