Index – Abroad – Western companies play Russian roulette with Putin

In recent weeks, the real estate of two Western companies operating in Russia has been placed under the control of a Russian state-owned asset manager. Danish beer maker Carlsberg and French food company Danone were the first victims of Putin’s new approach to foreign capital. Both companies issued only low-key press releases about covert nationalizations.

This is just the latest step in a process that began in April with the organization of Western energy companies Uniper and Fortum under, from the Russian point of view, “interim” state administration.

Vladimir Putin considered these nationalizations necessary because, he said, the management of the companies involved was trying to put pressure on Russian citizens, but the president added that the Russian leadership is very friendly to partners who do not want to leave Russia.

Those companies that are still present on the Russian market say that leaving is not so easy. Many people are afraid of their devices and technologies from the Russian state, others fear that their well-established brand may be misused by Russia.

The truth is that there is no good solution for Western businessmen: by staying, they draw the ire of anti-war activists demanding to leave, and by leaving, they risk their hard-earned business becoming the personal property of oligarchs overnight.

Putin Treats Foreign Investors Like Hostages

Andriy Onoprienko, director of a Ukrainian agency that tracks Western companies operating in Russia, told Politico.

Resigning is also not easy, because the Russians can drag it out almost indefinitely with the help of cumbersome bureaucratic procedures. In the case of companies falling under the jurisdiction of the Russian Ministry of Economy, there is a body to which they must apply in case of their departure. This is the Foreign Investment Advisory Board, where you need to apply to leave the country.

However, the council meets only three times a month, and even then they decide on only a few applications, while the rest have to wait in line. The irony of the situation is that in 1994 this body was created precisely to attract foreign investors, who in the years after the collapse of the Soviet Union were still very reluctant to open a business in the Russian Federation.

China could be the winner of nationalization

The withdrawal or nationalization of Western companies will mean that Russia will need new foreign investors. This vacuum is ready to be filled by China and those countries that have not imposed sanctions against Moscow because of Putin’s war.

This process is evidenced by the aggressive promotion of Chinese banks to the Russian market. The Bank of China, for example, achieved 400 percent growth in Russia last year. If Austria’s Raiffeisen and Italy’s UniCredit also flee the sanctions-hit country, Chinese financial institutions’ market share could rise even further, and

Relations between the two countries may become closer than ever.

On the other hand, invading Chinese companies will have to jump far enough to fill the void left by Western companies leaving certain industries. Areas of primary interest are electronics, drone manufacturing, and electric vehicle manufacturing. The problem is that although these Chinese companies are not on Western sanctions lists, they produce products that clearly support the Russian war effort.

(Cover photo: Aviapark shopping center in Moscow, July 12, 2023. Photo: Contributor/Getty Images)