Eastern Europe News

Back To The Future? Kremlin Proposes Taking Profits Of Private Companies To Survive Sanctions

Image by КПРФ ТВ

Russia is considering confiscating the profits of large private, natural resource companies in a bid to escape the pain from possible new sanctions coming out of Washington, inflicted on the Kremlin in response to the Skripal poisonings in the United Kingdom.

Putin’s economic advisor suggested siphoning the profits of those natural resource companies not yet hit with sanctions. The Russian president responded, “Agreed,” according to the Russian news outlet, The Bell.

It Was Bound To Happen: Russian Prime Minister Says US Conducting Economic Warfare Against His Country

Sanctions will also be problematic for the Russian government. If the bill proposed by Graham and Menendez were to be approved in its current form, western investors would no longer be able to buy new issues of Russian government bonds. Russia would lose its ability to borrow abroad, and it would be more difficult to sell the bonds in Russia without foreign investors (they held almost 30% of Russian government bonds at the beginning of this summer). But, the government already came up with a new way of finding money to fund Vladimir Putin’s pre-election promises. Yesterday, the media learned that Putin’s economic advisor, Andrey Belousov, suggested siphoning RUB 500 billion for the budget from the 2017 profits of privately held metals and chemicals companies. This is equal to one-third of the total EBITDA generated by companies in these sectors. They made good profits last year on the back of higher commodities prices (metal prices, for example, rose by 20.8%) last year, Belousov explained in his letter to Putin. The president replied on the resolution “agreed”. Business is worried — taking profits after the fact, without prior discussion and warning is difficult to imagine even in Russia’s state controlled economy. Shareholders of blue chip companies like Norilsk Nickel (it is supposed to donate almost $2 bilion) were surely surprised on Thursday when they read that the company might have to part with 90% of its 2017 net profit.

As Tsarizm has commented many times, the Trump administration is using the full power of American financial might to change the malign behavior of adversaries such as Russia, China, Iran, and North Korea. POTUS has obviously got Moscow’s attention.

The problem is that confiscating money from private firms would be the death knell in the near term for any further foreign investment inside the Russian Federation. With the public now ferociously opposing pension reform, and demanding higher levels of social spending (which Putin recently promised), Moscow is in a difficult position.

Fewer Than One In Five Russians Approve Of Putin’s Foreign Policy

Perhaps Trump looks to negotiate from a position of strength in regards to Syria, Ukraine, et cetera.

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