President Vladimir Putin has threatened this Thursday to freeze the assets of international companies that have suspended their activities in Russia after the invasion of Ukraine. The Ministry of Economy is preparing a series of measures to persuade companies to resume operations or even face possible nationalization.
Goldman Sachs had announced that it was leaving the country, shortly before Putin’s statement was revealed through Russian information agencies. It is the first major Wall Street bank to make this decision. The Japanese Uniqlo has also joined the business exodus from Russia, although it had recently defended the continuity of its activity in the country, citing logistical problems.
“Regarding companies that plan to close their production plants, we must act firmly,” Putin said in a videoconference meeting with members of the government. “In no way can we tolerate harm being caused to Russian suppliers,” he added. “If necessary, we will bring in external managers and transfer those companies to those who really want to work.” The Russian president considers that there are “sufficient legal and market instruments for this”, and that it is not necessary to resort to “arbitrary actions”.
The Ministry of Economy has released a statement indicating that it will prepare new measures to be able to take temporary control of companies that leave Russia in which foreign capital is greater than 25%, according to the Bloomberg agency. A court can respond to requests from members of the board of directors of companies or other interested parties to request that external managers be sent to carry out the day-to-day activities. Afterward, shares in foreign-owned companies can be frozen as part of the Kremlin’s efforts to maintain ownership and employment. The owners will have five days to resume activity or evaluate other options, such as selling their stake.
Not many more details are known about the Russian initiative, nor how it will affect companies that have 100% foreign capital. This is the first explicit response to the exodus of Western firms after the invasion of Ukraine, both for reasons of corporate reputation and the logistical difficulties arising from the conflict and the sanctions imposed by the EU, the US and the UK.
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The list of Western companies that have suspended their operations, in one way or another, in Russia is getting longer and longer: Coca-Cola, PepsiCo, McDonald’s, Unilever, Volkswagen, Inditex, Mango, Ikea, among many others. The companies that are holding out are mainly international hotel chains – although Marriott, Hilton and Hyatt have closed their offices and halted expansion operations they had underway – and food companies such as Danone. “We have a responsibility to the people we feed, the farmers who provide us with milk, and the tens of thousands of people who depend on us,” Danone CEO Antoine de Saint-AffriqueSaint-Affrique told reporters. Financial Times.
Putin has admitted that the sanctions have had an impact on Russia, but has assured that the economy will adapt over time. He has also said that the sanctions would have been imposed regardless of the war in Ukraine. Russia, he has said, will continue to fulfill its contractual obligations in relation to energy supplies, referring to remarks made this week by Deputy Prime Minister Alexander Novak in which he warned that Moscow had the option of cutting off gas sales to Europe.
But the truth is that the Kremlin needs this money (700 million euros a day) especially now that it is facing the impact of the sanctions, and that the United States and the United Kingdom have also announced the blocking of the purchase of Russian oil. Russia faces the imminent risk of suspension of the external debt, because the sanctions have cut off access to its reserves in dollars and other currencies such as the euro to pay its creditors, a measure that would have devastating effects for its economy. Fitch Ratings downgraded Russia’s credit rating to junk bond level on Wednesday, following similar decisions recently made by Moody’s and S&P Global, the other major credit rating firms. rating.
