Western companies that have not yet left Russia but still want to do so must make a mandatory contribution to the Russian treasury. In the event of a takeover, 10 percent of the sale price is to be transferred to the Russian government. This was decided by a Russian government commission.
After many companies announced their departure from Russia due to the war in Ukraine, Russia has tightened the rules of departure. Companies that Russia labels “hostile” must first have sales plans approved by this government commission.
The mandatory 10 percent payment is not entirely new: companies could also choose to pay the sales sum in installments over one to two years. That choice is now gone, so companies still have to pay that 10 percent. After all, the measure should discourage companies from leaving Russia.
‘This money can also be used for war purposes’
“It will scare companies,” thinks international economist Hein Roelfsema of Utrecht University. “Companies now have to pay money directly to the Russian state. Which can also be used for war purposes».
Few companies are gone
More than a year after the war, many well-known brands have ceased their Russian activities. Yet only nine percent of all Western companies have left Russia completely, economists Simon Evenett and Niccolò Pisani calculated late last year, based on data from the ORBIS corporate database.
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The researchers looked at data from companies based in an EU or G7 country that are or were active in Russia. They compared data for February and the end of November 2022. Only 9% of companies had sold at least one Russian subsidiary.
Obligations
“Not all companies were able to leave quickly,” says Roelfsema. ‘Some companies will go bankrupt if they start deleting Russian assets. It costs so much money, not all companies have that space.’ Other companies were unable to launch immediately due to licensing obligations in Russia.
‘Heineken is only a Russian company, the Russian branch can continue to produce’
Many of these companies are in fact simply Russian, Roelfsema says. ‘Many companies have their own production facilities there. Take Heineken: it’s just a Russian company, that Russian subsidiary can continue to produce.’
Sell
Furthermore, according to Roelfsema, many entrepreneurs misjudged the duration and scope of the war. ‘Russia is a very big market. Many will have thought: ‘We mustn’t leave before every gust of wind.”
The new Russian rules put these companies under even more pressure, he thinks. Companies from those so-called “hostile countries” often had to pay hefty fines when they left Russia. There is now a mandatory payment of 10 percent of the sale price. “The only way to get rid of your Russian branch is to sell it.”
Then, according to Roelfsema, you soon find yourself with Putin’s friends. They will pay you next to nothing. It’s also possible that such a company won’t receive any money for the sale in the end, because you can’t take anyone to court.”
Big market
Despite all the sanctions against Russia, investing in the country, despite all the moral objections, is still quite economically attractive, says Roelfsema. “Those sanctions are a long-term game. Russia is no longer a growth market, but it is still a very large market.’
Source: BNR
Sharon Rock is an author and journalist who writes for 24 News Globe. She has a passion for learning about different cultures and understanding the complexities of the world. With a talent for explaining complex global issues in an accessible and engaging way, Sharon has become a respected voice in the field of world news journalism.
