Russia Tightens Screws on Foreign Assets

Moscow's invasion of Ukraine last year prompted nearly every company headquartered in EU and G7 countries to announce plans to withdraw from Russia, divest assets or freeze investment in the country. But some 18 months later, very few have made a full exit. One reason is that Moscow has tightened the terms for withdrawal, making it almost impossible on practical business level. Indeed, those who got out earliest have fared best. The remaining companies, including BP and TotalEnergies, face mostly bad options — either selling assets at half the market price or transferring them to a Russian firm free of charge under a growing risk of nationalization. According to findings by researchers at the Swiss Institute for Management Development and the University of St. Gallen Economics Department, a total of 2,405 subsidiaries owned by 1,404 EU and G7 companies were active in Russia in April 2022. By late November 2022, less than 9% had divested at least one of their subsidiaries in Russia. According to the Kyiv School of Economics, less than 300 of over 3,350 large foreign companies that owned assets in Russia have left by now, and only about 500 are in the process of withdrawing. Russia's Central Bank says firms exiting Russia concluded 200 divestment deals through March 2023 — but only 20% have sold assets worth more than $100 million. In the oil sector, Shell managed to sell its downstream business in Russia to Lukoil, which also bought Enel's Russian assets. Other deals have also been approved, including the sale of Total's stake in the Termokarstovoye gas field to Novatek and Shell's divestment of stakes in upstream joint ventures with Gazprom Neft. However, values for these transactions have not been revealed.