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26 Apr, 2023 00:58

Russia responds to Western asset seizures

President Putin has approved a framework for the “temporary management” of foreign property
Russia responds to Western asset seizures

Russian President Vladimir Putin on Tuesday signed a decree establishing a mechanism for temporarily taking over foreign assets. In its first practical application, the Federal Property Management Agency was put in control of the Russian subsidiaries of Fortum and Uniper, energy companies based in Finland and Germany, respectively.

The decree allows for the temporary state takeover of assets deemed to be “of paramount importance for the stable functioning of the Russian energy sector,” the agency said in a statement. Germany’s Uniper SE held a 83% stake in a Russia-based energy generation and distribution company Unipro, while Finnish state company Fortum Oyj controlled over 98% of its local subsidiary, with a total power generation capacity of 11.2 and 4.7 gigawatts respectively. 

The move will “ensure the uninterrupted operation of companies significant for the national economy and eliminate the risks of the political position of a number of unfriendly countries influencing” the security of Russia.

The original owners are considered to have temporarily lost control of the property, but not forfeited it outright. The measure “helps preserve the investment climate in Russia and reduce the outflow of capital from the country,” the agency added.

The decree also establishes a legal framework that enables the Kremlin to take over more foreign assets should other countries seize Russian private or government property in their jurisdictions, or threaten the national, energy, or economic security of Russia.

Germany and Poland have so far seized an estimated $22 billion in assets belonging just to two Russian companies, Gazprom and Rosneft, according to media estimates. In June 2022, Berlin took over Gazprom Germania GmbH. In November, Warsaw confiscated Gazprom’s 48% stake in the EuRoPol GAZ joint venture, the owners of the Polish portion of the Yamal-Europe pipeline.

The Polish subsidiary of Novatek, which dealt in liquefied natural gas and other hydrocarbons, was also seized. Its assets were put up for sale earlier this month.

In September last year, Germany seized Rosneft’s stake in three major oil refineries, accounting for 12% of the country’s total refining capacity. Rosneft’s complaints against the move were dismissed by German courts. A law enacted by the Bundestag on April 20 may allow the outright expropriation of Russian assets by Germany. 

The US government has sought to seize Russian state and private assets frozen under the Ukraine-related sanctions and turn them over to the government in Kiev, a move that critics have said would change the very nature of sanctions from an instrument of pressure to purely punitive.