Key facts
- Russia has placed Nestlé Russia under temporary external administration.
- Auchan and Metro have also had their assets placed under external control.
- Kremlin spokesperson Dmitry Peskov stated the companies were from "unfriendly countries" involved in actions against Russia.
- Foreign firms from "unfriendly countries" must sell assets at a 60% discount and pay a 35% contribution to the state budget.
- In 2023, Danone and Carlsberg's Russian subsidiaries were similarly placed under external administration.
- Russian state news agency TASS reported 135 companies linked to foreign firms are under such controls.
Russia has placed Nestlé Russia under temporary external administration, a move that could lead to the company's confiscation or nationalization, signaling a shift in the Kremlin's approach to foreign businesses operating in the country. The decision follows similar actions against French supermarket chain Auchan and German food wholesaler Metro, whose assets have also been placed under external control.
Kremlin spokesperson Dmitry Peskov stated that the companies were from "unfriendly countries" that were "actively involved in military actions against our nation." This move suggests that geopolitical considerations and the war in Ukraine are paramount for the Russian government, overriding previous assumptions about temporary disruptions.
Historically, foreign companies entering Russia after the Soviet Union's collapse found a market with both high risks and high rewards, making phenomenal returns in the 1990s and early 2000s. However, many failed to adapt to the political realities, according to Charles Hecker, author of "Zero Sum: The Arc of International Business in Russia." Today, the market is seen as equally risky but with diminished returns.
Companies that wish to leave Russia face significant penalties, including selling assets at a 60% discount and paying a 35% contribution to the state budget. Some companies have chosen to stay, hoping for a future market reset, a strategy that may now be untenable. Professor Christopher Hartwell noted that companies might stay to keep a "foot in the door" due to the difficulty of re-entering the market later.
Past actions, such as the external administration of Danone and Carlsberg's Russian subsidiaries in 2023, served as warnings. Russian state news agency TASS reported that 135 companies linked to foreign firms are currently under such controls. Geopolitical analyst Alexander Kokcharov suggests that these seized assets are likely to be used to secure loyalty from groups that support the Kremlin, especially as Russia's economy is strained by the war.
Kokcharov believes the Kremlin's earlier assumption that sanctions and business disruptions were temporary is now being questioned. The current approach indicates a move away from a "business as usual" mentality, with the state prioritizing loyalty and resource allocation for the war effort over maintaining international business relationships. This suggests that more Western companies may face similar asset seizures.