Russia is offering foreign companies, seeking to exit the country, fast-tracked bankruptcy options as businesses face increasing challenges from western sanctions imposed as a result of Moscow’s initiation of war against Ukraine.
The fast bankruptcy plan “will support the employment and social well-being of citizens so that bona fide entrepreneurs can ensure the effective functioning of business,” said the government.
First Deputy Prime Minister Andrei Belousov outlined three options for foreign firms with operations in Russia. One, “the company continues to work fully in Russia.” Two, “foreign shareholders transfer their share to be managed by Russian partners and can return to the market later.” Or three, “the company permanently terminates operations in Russia, closes production, and dismisses employees.”
All three choices come with risks. Foreign companies that do decide to continue operating in Russia might have to face severe backlash in the West as the general public increasingly rallies behind Ukraine.
If firms decide to transfer shares, they will be handing over business assets with little to no guarantee that these resources will be returned back intact in the future. Finally, companies that decide to quit might be forced to sell their business for cheap and suffer a loss.
Many foreign firms in Russia are still trying to assess the cost of their exposure in the country, a number that keeps changing as new sanctions are imposed or removed. It is estimated that global investors, companies, and banks have over $110 billion worth of exposure in Russia. Research firm Morningstar puts the exposure of international funds to Russia in the form of bonds and stocks at around $60 billion.
Several businesses have announced their decision to pause or exit from their Russian operations. Oil and gas giant Shell plans to withdraw from its projects in Russia as well as end its involvement in the Nord Stream 2 pipeline project.
BP plans to get rid of its 19.75 percent stake in Russian integrated energy firm Rosneft. Norway’s Equinor ASA has announced withdrawal from Russian projects worth around $1.2 billion.
Japanese carmaker Toyota will suspend operations at its sole plant in Russia. French multinational integrated oil and gas company TotalEnergies has decided not to invest any more in the country. IKEA declared store closures across Russia.
Nokian Tyres from Finland plans to shift part of its production to other nations. The world’s largest chemicals group BASF is pausing new businesses in Russia and Belarus. Swiss watchmaker Swatch Group has halted exports to Russia due to the “overall difficult situation.”
Meanwhile, there have been speculations of the Russian government nationalizing the properties of foreign companies. However, Presidential Spokesman Dmitry Peskov recently dismissed such a possibility.
“I am not aware of this, and the Kremlin is not considering it,” he said. “All issues related to sanctions, to minimization of the damage of those sanctions are considered and decisions are taken by the government’s crisis center headed by [Russian Prime Minister Mikhail] Mishustin.”