Putin Pushing Law To Seize Western Firms Leaving Russia

Russia is advancing a new law allowing it to take control of the local businesses of Western companies that decide to leave in the wake of Moscow’s invasion of Ukraine, raising the stakes for multinationals trying to exit, John O’Donnell reported for Reuters.

Photo Insert: An IKEA store in Russia

The law, which could be in place 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 disentangle themselves quickly unless they are prepared to take a big financial hit.

The law to seize the property of foreign investors follows an exodus of western companies, such as Starbucks, McDonald's, and brewer AB InBev, and increases pressure on those still there.

It comes as the Russian economy, increasingly cut-off due to Western sanctions, plunges into recession amid double-digit inflation.

Italian lender UniCredit, Austrian bank Raiffeisen, the world's biggest furniture brand IKEA, fast-food chain Burger King and smaller firms still have businesses in Russia.

Anyone that tries to leave will face this tougher line. Scores of foreign companies have announced temporary shutdowns of stores and factories in Russia since Putin launched what he calls a "special military operation" to demilitarize and "denazify" Ukraine, dismissed as a baseless pretext for the war by Ukraine and its allies.

"Russia was already isolated and no longer of interest to investors," said Michael Loewy of the Federation of Austrian Industries. "This law can only make that worse."

The bill paves the way for Russia to appoint administrators over companies owned by foreigners in "unfriendly" countries, who want to quit Russia as the conflict with Ukraine drags down its economy. Moscow typically refers to countries as "unfriendly" if they have imposed economic sanctions on Russia, meaning any firms in the European Union (EU) or United States are at risk.

The European Commission proposed toughening its own stance on Wednesday to make breaking EU sanctions against Russia a crime, allowing EU governments to confiscate assets of companies and individuals that evade restrictions against Moscow.

Meanwhile, in a move that could push Moscow closer to the brink of default, the Biden administration announced it would not extend a waiver that enabled Russia to pay US bondholders.

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