Russian Authorities Scrutinize and Micromanage Corporate Exit Plans

Foreign Firms Struggling to Exit Russian Market

Russian authorities are closely examining and tightly controlling corporate exit plans, as reported by The New York Times. While many foreign companies have announced their intention to leave Russia following the country's invasion of Ukraine, they are still operating there and facing difficulties in the exit process.

Kremlin's Oversight of Corporate Exit Plans

Despite their efforts to leave, the Kremlin is meticulously reviewing and managing almost every corporate exit plan before granting approval, according to The New York Times. This report comes nearly 22 months after Russia's invasion of Ukraine, shedding light on how the Russian authorities impose significant obstacles on firms attempting to exit a market that has been heavily impacted by comprehensive sanctions, including the recent 12th round of trade restrictions imposed by the European Union.

Challenges Faced by Foreign Companies

Although some companies, such as McDonald's and Starbucks, managed to make quick exits during the early stages of the war, leaving within a matter of months, Russia has made the process much more challenging. Foreign companies looking to depart from Russia now have to pay donations to the state and sell their assets at a significant discount before they are allowed to leave. Additionally, their departure plans must be approved by a government commission. In sectors deemed strategically important, such as energy and resources, President Vladimir Putin's authorization is required for any asset sale.

Stringent Scrutiny and Consequences

Russian authorities are scrutinizing companies seeking to exit to such an extent that even minor transactions, like Nokian, a Finnish tire company selling an apartment for $59,000, require approval, as revealed by internal minutes cited by The New York Times. The report also highlights that Moscow has gone beyond bureaucratic hurdles, with instances of companies being investigated, employees interrogated, and local executives being arrested.

Reasons for Companies Remaining in Russia

A recent analysis by Business Insider shows that most foreign firms have not completely withdrawn from the Russian market, despite several major international names already having exited. Companies still operating in Russia have cited various reasons for their decision, including operational challenges, ethical concerns, and policy issues. Some are also worried about the fate of their assets and technology within Russia.

Kremlin's Perspective on Corporate Exits

The Kremlin appears unconcerned about the departure of Western corporations. Kremlin spokesperson Dmitry Peskov told The Times, "Those who are leaving are losing their position. And, of course, their property is being bought at a serious discount and taken over by our companies, which are doing it with pleasure."

Read the original article on Business Insider.

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By: htan@insider.com (Huileng Tan)
Title: Russian Authorities Scrutinize and Micromanage Corporate Exit Plans
Sourced From: www.businessinsider.com/russia-economy-putin-kremlin-scrutinizing-western-companies-corporate-exit-departure-2023-12
Published Date: Tue, 19 Dec 2023 04:39:08 +0000