Posted on 05/27/2022 3:30:57 AM PDT by blam
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.
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 hundreds of smaller firms still have businesses in Russia. Any that try to leave face this tougher line.
IKEA, which has paused all operations in Russia, said it was closely following the development. Raiffeisen, said it was assessing 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 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 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 U.S. bondholders.
Economic Pain
The departures of western firms have angered Russian politicians. Former president Dmitry Medvedev, who is now deputy chairman of Russia’s Security Council, has been a particularly vocal critic of western companies who left, attacking “enemies who are now trying to limit our development and ruin our lives.”
“The government is interested in preserving jobs and tax revenues,” said Sergej Suchanow, a lawyer with risk management and compliance consultancy RSP International.
“First and foremost, the government will apply the rules to big companies. To avoid an administrator, companies must show they are not leaving their Russian businesses in the lurch.”
Ulf Schneider, a consultant working with German companies in Russia and an expert in the region with Germany’s mid-sized or “Mittelstand” industry group BVMW, said he and others are working on proposals to allow foreign companies to voluntarily hand over control to a trustee of their choice.
That could convince Russia they are being responsible while at the same time distancing themselves.
“Sale is an option but the conditions for a sale are not good,” Schneider said.
The draft law outlines how Russia could appoint an administrator to firms where at least 25% of the shares are in “unfriendly” foreign hands.
It lays down a wide range of criteria for intervention, such as when a company plays a critical role as a local employer or provides important services. It makes clear that the state can justify taking control on many grounds.
The bill cites the example of companies making medical devices but also lists a host of other sectors, such as transport and energy, as well as any firm whose closure could push up shop prices.
The state-appointed administrator would also be allowed to sell the confiscated business, while its former owners would be barred from doing business in Russia.
A court or the Ministry of Economic Development could decide to put an administrator, such as Russia’s development bank VEB, in charge.
The bill passed its first reading in the lower house of parliament, or Duma, this week but still faces two further readings and an upper house review before being signed by President Vladimir Putin into law.
That could take several weeks. Russia’s economy ministry said it would pick out companies only in ‘critical cases’ where it was necessary to shield production or jobs.
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.”
Russia seems determined to isolate itself from everybody except copycat socialist tyrannies like Belarus, Cuba and Venezuela.
What on earth do they think they’ll get out of it?
Why them? I thought the companies decided to exit, or their governments told them so.
Primitive thug Putin and his buddies want to stay in power and nothing else.
It doesn’t have to make sense outside of that.
What did Soviet Russia get out of not even having toilet paper and forcing people into two-hour bread lines?
Where Russia starts logic ends.
Just wire the cash out a little at a time, in denominations of 8,000 USD each. Then jump on a private jet and say do svidania.
“What on earth do they think they’ll get out of it?”
I watched an analysis on what it is Putin wants. He’s a dictator propped up by oligarchs who owe their money and very lives to him. He essentially wants all of the surrounding countries to have leaders he picked who also owe their fortunes and very lives to him. Ukraine, a modestly less corrupt country, was beginning to do better. Ukraine was sidling up to Europe as a trading partner which is much more profitable than its traditional and only big trading partner, Russia. Ukraine was materially supporting Putin and, worse, it had discovered significant oil and gas deposits in the now disputed territories of the Donbas. Putin realized that the new oil and gas would compete against his monopoly, and he wanted it for himself or, at least, to keep it from competing with his monopoly.
For various reasons, the Russians stopped having kids. For one, in Putin’s Russia, they couldn’t afford them. Russia is in a Demographic collapse that is unrecoverable. If they were going to use their army to rectify any of this, they had to do it by 2025. But, not only has the invasion sparked a renewed interest in NATO, but it has also prompted an estimated one million draft age Russians to flee the country. Most of them won’t be back. This exceeds the estimated 40,000 kidnapped Ukrainian children who were shipped East to Siberia to help make up the collapsed demographic numbers. Also, anyone who was well educated has also fled. This has got to be one of the worst “oh crap!” moments any country has experienced.
Everyone does it.
Under Clinton, the US instituted exit tax laws, by defining change of citizenship as a taxable event, with taxes during on any property gains.
Tit for tat; Russia is moving towards China. The Pacific Rim is where the real competition is at. Biden wanted to shut up Russia over his own graft in the Ukraine. Russia’s pivot towards China is going to hurt Western consumers in the long run. The entire world is in double digit inflation, but Russia is not suffering from self imposed energy restraints.
Effectively US expats have to pay US tax only if they make over ~$150k a year abroad.
That’s very rare.
Seize McDonald’s?
“Russia seems determined to isolate itself from everybody except copycat socialist tyrannies like Belarus, Cuba and Venezuela.”
Plus a bit more than half of the world, starting with India and China. Obviously, the media doesn’t report that.
“In a way, I envy the Russians. They no longer have to buy overpriced lattes.”
Yep, Lattes aren’t tough to make, and the Russian firm that takes over will likely sell them for far less. It was nice of Starbucks to leave them the shops.
The ruble has gone from 55 to 67 during the past several days, a drop of 18%!
Russia is becoming China’s prison b@@@@. China has them by the testicles. China will tell Russia how high to jump and when.
You’re talking about US Citizens working overseas paying US tax on their annual income.
I was talking about US citizens who change their citizenship and renounce their US citizenship. The analogy is that the government seizes a good chunk of any long-term profitable assets via capital gains taxes. It’s a forced valuation, as if it were a sale. Because, when you’re gone, you’re really gone.
That was introduced under Clinton.
Man, you sure wrap up a lot of conspiracy theories in one post - IMPRESSIVE! The Western Media still controls people, I guess.
Oil company greed (old favorite,) Ukrainian kids sent to Siberia (why not claim it, impossible for Russia to disprove), no more kids in Russia (as if Europe, other than Muslims, are having any), everyone fleeing West to avoid conscription (despite no draft for the past 10 years and no talk of significant military operations until early this year).
“Man, you sure wrap up a lot of conspiracy theories in one post - IMPRESSIVE! “
THANKS! I work hard at it. :)
“For one, in Putin’s Russia, they couldn’t afford them. Russia is in a Demographic collapse that is unrecoverable.”
Coming back to this topic - while true in Soviet times and the 1990s, you may want to check where the countries line up now on birth rate. Of the major countries in Europe, only the ones with large Muslim minorities have higher birthrates than Russia. To save you the trouble, here’s the numbers.
Italy.........6.95
Spain.........7.13
Bulgaria..8.05
Poland.....8.5
Hungary...8.65
Romania...8.76
Ukraine...9
Belarus...9.08
Germany...9.08
RUSSIA......9.45
Switzld...10.36
UntdKdm...10.79
Sweden.....10.83
Belgium...10.95
Nethld.....10.99
Denmark...11.22
France......11.66
Norway......12
Ireland...12.32
“THANKS! I work hard at it. :)”
LOL!
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