The Kremlin has weaponized expropriations until 2024. He threatens to keep Western assets on Russian territory if the United States and the European Union in turn seize Russian assets frozen by the invasion of Ukraine; At the same time, it puts pressure on its own citizens to appropriate their wealth if they are convicted of criticizing the army or refusing military service. Paradoxically, this policy of confiscation coincides with a wave of partial privatizations with which the Kremlin is trying to squeeze out as much money as possible to finance its war and with which it wants to strengthen the support of its beneficiaries, the Russians who have shown their loyalty to President Vladimir Putin .
The US Senate Foreign Relations Committee approved this Thursday the REPO bill, the law that would allow the allocation of frozen Russian assets to Ukraine, and the Kremlin has promised to give an appropriate response to the West if it takes this step finally undertakes. The European Union and the United States have not yet made a decision due to the shortage of foreign capital that the measure could bring, but Moscow warns that billions of Western assets stuck in Russian accounts will be permanently lost to the Kremlin.
The Russian Central Bank introduced the so-called Type C accounts at the beginning of the war “to prevent the withdrawal of funds and assets from Russia by residents of enemy countries.” Transactions between residents and non-residents were transferred to these accounts in order to keep the money in Russia until further notice. Among other things, the withdrawal of funds from the sale of a company without the express permission of the Ministry of Finance was prohibited.
A state news agency, Ria Novosti, estimated this week that Western assets in Russian accounts are worth about $288 billion. However, they are figures that should be viewed with caution: of the 223 billion attributed to European countries, 98.3 billion come from Cyprus, one of the favorite tax havens of Russian tycoons, an island from which they are currently avoiding some sanctions. Germany, to give an example of Russia's most important trading partner until the war, only has about 17.3 billion.
On April 25, 2023, one year and two months after the start of his offensive against Ukraine, Putin signed a decree authorizing his government to “temporarily” take control of the assets of foreign companies in Russia. On that day, the Federal Agency for State Property Management, Rosimushchestvo, replaced the directors of two energy companies, the subsidiaries of the German Uniper and the Finnish Fortum. A total of a dozen thermal power plants and the largest gas power plant in the country.
“The aim of the decree is to create a compensation fund for possible retaliation against the illegal expropriation of Russian assets abroad,” Putin’s spokesman Dmitry Peskov warned at the time.
Western companies that did not flee in the first months of the war have been in a cage since last year. Many companies such as McDonald's and Inditex chose to transfer their subsidiary to Russian partners and suppliers at reduced prices, with the option to return in the future, a decision that is “still on the table,” according to industry sources.
However, the Kremlin has made his progress more difficult. In December 2022, he stipulated that the sale of assets must be at a 50% discount to their market value, and three months later he stipulated that at least 5% of this valuation must finance his budget. Finally, in June, the Russian president signed another decree giving the government the right to buy Western assets “at reduced prices” if it believes they have caused Russia significant losses or their management has deteriorated.
“If a company does not fulfill its obligations, it falls into the category of bad companies. What we do with their assets after that is our business,” Peskov said at the time.
The most striking cases in recent months have been those of the Danone subsidiary; that of one of the country's largest car dealerships, Rolf, and that of the Carlsberg Group's Baltika brewery. Management of the subsidiary of the French food group was transferred to the nephew of Chechen President Ramzan Kadirov last summer. In addition to taking control of this succulent business, 33-year-old Yakub Zakriyev is also the Minister of Agriculture of the Caucasus Republic.
In turn, control of Rolf was transferred to Rosimushchestvo. In theory, the company's shares still belong to the parent company based in Cyprus, but the assets have been managed by the Russian authorities without paying compensation. This is the same manual as in the Baltika case, whose owners refuse to negotiate with Moscow.
“They stole our business in Russia and we will not help them legitimize it,” Carlsberg director Jacob Aarup-Andersen told reporters this fall. The company has classified the new revenue from its subsidiary as money owed to it by the Russian government.
In parallel, the Kremlin has seized control of other Russian giants because their owners decided – or were forced by the authorities – to liquidate their companies and leave the country. Among others, Tinkoff Bank and the technology company Yandex, which until recently was considered a major rival to Google. Interestingly, the Russian government has also reversed some privatizations from the 1990s: a court ruled in September 2023 that one of Russia's largest methanol production plants, owned by Metafrax, had been illegally acquired more than three days earlier. ©falls back.
Change of ownership
Russian Finance Minister Anton Siluanov announced this year a program for the partial privatization of 30 companies in which the state would not lose its majority stake. He did not name names and set a modest income target, about 1.2 billion rubles, about 12 million euros at the exchange rate. But there is a catch: in 2023 the goal was similar, but the final revenue was 16 times higher, up to 300 million euros.
According to Ekaterina Kurangaleyeva, an expert at the Carnegie Center, “this nationalization and privatization 2.0 – she compares them to the processes in the years after the disappearance of the Soviet Union – seem mutually exclusive, but in reality they may well be compatible and their combination can bring stability to the political system.”
The analyst shares the concept of “quasi-nationalization” proposed by former Finance Minister and current Yandex boss Alexei Kudrin: while important companies are taken over by state banks, non-strategic assets (especially the consumer market) are taken over by state banks at bargain prices redistributed to the nouveau riche, the upper middle class and the regime's administration and security forces. “Those who remained in Russia hoping to benefit from a mass exodus (…) and become a source of patriotic support,” he summarizes.
Russian authorities have also resorted to confiscations as a weapon to intensify internal repression. The speaker of the State Duma, Russia's lower house, Vyacheslav Volodin, and the leaders of parliamentary factions introduced a bill this week that would provide for the confiscation of the assets of citizens who criticize the war against Ukraine.
The initiative envisages the confiscation of money, valuables and other property from those accused of “deliberately spreading false information about the use of Russian armed forces”, including criticizing the deaths of civilians in bombings and “publicly promoting extremist activities to call up”. That means people are calling for demonstrations on the streets.
“Anyone who tries to destroy Russia, who betrays it, must suffer his deserved punishment and compensate for the damage caused to the country at the expense of his property,” Volodin said.
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