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The Russian Federation has tightened rules for Western ‘unfriendly’ countries seeking to sell their businesses and leave the country.
The government subcommittee that issues permits for companies from “unfriendly” countries to sell Russian assets hiked the required price discount from 50% to 60% in early October. At the same time, the “voluntary contribution” to the state went up from 15% to 35% of the market value of the assets. Formally, the “voluntary contribution” is paid by the buyer, however it is often priced into the deal. Thus, after selling its Russian business, a foreign company might now leave with just 5% of its value. The new rules affect all deals not yet approved by the subcommittee, reported Russian idependent news outlet The Bell.
The Russian authorities often say that they want companies from unfriendly countries to continue operations in the country. The reasons for this are political, as well as financial. Since the start of the war, foreign owners have been unable to withdraw profits in the form of dividends, which remain locked in special ruble accounts. According to a report from the Deposit Insurance Agency, which manages these accounts, there were 1.2 trillion rubles ($12 billion) in such accounts in December last year. That’s at least 20 times less than the Russian funds that were frozen in the West at the start of the war, but Russia has made it known that it is prepared to seize this money in response to any perceived attempt to seize its assets in the West.
For the most part, shareholders in foreign companies cannot receive profits from Russian operations. They also cannot invest profits in expanding production. As a result, Russian assets do not generate profits – and only remain on the general list of assets. Companies that decided to write off their Russian assets have already lost $107 billion, Reuters calculated in March.
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