Russia is promoting a new law that allows it to have control over them local western companies deciding to leave after Moscow invasion of Ukraineincreasing the stakes for multinationals trying to leave.
According to Reuters, the law, which could take effect within weeks, will give Russia sweeping powers to intervene where there is a threat to local jobs or industry, making it more difficult for Western companies to get rid of quickly unless they are prepared to suffer a major financial blow.
The law on the confiscation of the property of foreign investors follows an escape of Western companies, such as Starbucks and McDonald’s, and increases the pressure on those who are still there. It comes as the Russian economy, increasingly cut off by Western sanctions, plunges into recession amid double-digit inflation.
THE Italian bank UniCreditthe Austrian bank Raiffeisenthe largest furniture brand in the world, IKEAthe fast food chain Burger King and hundreds of smaller companies still have businesses in Russia. Anyone trying to leave faces this harsher policy.
IKEA, which has stopped all activities in Russia, said it was closely monitoring developments. Raiffeisen said it was evaluating all options, including a carefully managed exit. UniCredit declined to comment, while Burger King did not immediately respond to a request for comment.
The bill paves the way for Russia to appoint managers to companies owned by foreigners from “unfriendly” countries who want to leave Russia, as the conflict with Ukraine drags its economy.
Moscow usually refers to countries as “unfriendly” if they have imposed it economic sanctions in Russiawhich means that any companies in the European Union or the United States are at risk.
The European Commission proposed toughening its stance on Wednesday to criminalize violation of EU sanctions against Russiaallowing EU governments to seize the assets of companies and individuals evading restrictions against Moscow.
Meanwhile, in a move that could push Moscow closer to the brink of bankruptcythe Biden government has announced that it will not extend an extension that would allow Russia to pay US bondholders.
Withdrawals from Western companies have angered Russian politicians. THE former President Dmitry Medvedevwho is now Vice President of the Security Council of Russia, has been particularly critical of Western companies that have left, attacking “enemies who are now trying to limit our growth and destroy our lives.”
“The government is interested in maintaining jobs and tax revenue.” said Sergej Suchanow, a lawyer at RSP International risk management and compliance consulting firm.
The bill describes how Russia could appoint a manager in companies where at least 25% of the shares are in “unfriendly” foreign hands.
It sets out a wide range of intervention criteria, such as when a company plays a critical role as a local employer or provides important services. It makes it clear that the state can justify taking control for a number of reasons.
The bill cites the example of companies that make medical devices, but also lists a number of other sectors, such as transportation and energy, as well as any company whose closure could raise store prices.
The state-appointed administrator could also sell the seized business, while its former owners would be barred from operating in Russia.
A court or the Ministry of Economic Development could decide to take over an administrator, such as Russia’s VEB development bank.
The bill passed first reading in the lower house of parliament this week, but still faces two further readings and a revision in the upper house before being signed by President Vladimir Putin to become law.
This can take several weeks. Russia’s Economy Ministry has said it will select companies only in “critical cases” where it is necessary to protect production or jobs.
“Russia was already isolated and no longer interested in investors,” said Michael Loewy of the Austrian Federation of Industries. “This law can only make it worse.”
economytoday
Follow Skai.gr on Google News
and be the first to know all the news
