The Kremlin has taken control of the Russian subsidiaries of Finland’s Fortum and Germany’s Uniper, moves it said were a response to western confiscations of Russian assets.
Dmitry Peskov, President Vladimir Putin’s spokesman, told reporters on Wednesday that the Kremlin wanted to establish a “compensation fund” to hit back against what he called “the illegal expropriation of Russian assets abroad”.
Putin signed a decree late on Tuesday to “protect Russian property and national interests” by allowing the state to impose “temporary control” over the assets of companies from countries deemed unfriendly by the Kremlin.
The move underscores the deadlock faced by western companies in Russia following its invasion of Ukraine and follows a series of measures imposed by Moscow to restrict their exit.
Companies from “unfriendly” countries can only sell their Russian assets for a maximum of half their value and must make a “voluntary contribution” to Russia’s war chest of 5-10 per cent of the sale price. Deals require the approval of the government and, in the energy and financial sectors, Putin himself.
While the Kremlin insists ownership of the assets remains unaffected, the decree allows Russian authorities to impose “temporary external control” over both the property and shares of companies from “unfriendly” jurisdictions.
Such assets are to be placed under the control of Russia’s federal state asset management agency unless Putin decides otherwise, and only he can reverse the external control.
“This is a new turn in the sanctions war,” said Alexandra Prokopenko, a former Russian central bank official and visiting fellow at the German Council on Foreign Relations. “Russia refrained from directly nationalising assets in 2022 in the hope that business as usual would make a comeback and Russian companies would avoid having their assets nationalised in Europe. Putin’s decree shows the Kremlin has abandoned those hopes.”
Fortum, which is controlled by the Finnish state and is the Nordic country’s largest utility, was until the invasion of Ukraine last year one of the biggest investors in Russia’s energy sector. It was also the majority owner of Uniper until Berlin nationalised the German company last autumn.
Russia accounted for more than 10 per cent of Fortum’s profit and headcount in 2021, while Fortum — one of the few foreign companies to participate in the privatisation of Russia’s energy sector in the early 2000s — represented about 5 per cent of Russia’s power generation capacity.
The Finnish group said in spring last year that it was looking to sell its Russian assets but was unable to proceed after Putin imposed restrictions on such deals. Fortum last May wrote down its Russian assets by €2.1bn but still valued them at €1.7bn at the end of last year.
Uniper, which was once Europe’s biggest importer of Russian gas and had already announced in February it was taking a €4bn hit after losing control of its Unipro subsidiary, said it was “reviewing the legal situation” in the wake of the decree. The German finance ministry, which now controls the company, said it was examining the matter.
While Unipro and Fortum’s Russia business were the only companies named in documents released alongside Putin’s decree, it said all companies linked to “unfriendly countries” could eventually be affected.
“External control was introduced selectively for energy production companies that are most important for the Russian energy sector,” Peskov said. “This ensures that the companies that are important for the economy will operate in a stable manner. We only hedge our own risks.”