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7 May, 2024 21:54

Russian company to take over German chemical giant’s subsidiary

President Vladimir Putin has allowed the acquisition of BASF Vostok by a domestic enterprise
Russian company to take over German chemical giant’s subsidiary

President Vladimir Putin has given permission for the acquisition by a Russian firm of BASF Vostok, a subsidiary of German-based chemical giant BASF, which withdrew from the country in 2022 due to the Ukraine conflict.

Lakra Sintez, a domestic manufacturer of paints and varnishes, was granted the right to buy out 100% of the shares of BASF Vostok under a 2022 presidential decree that introduced special measures in response to the “unfriendly actions of some foreign states and international organizations,” according to a document published by the Russian government.

The decree envisaged various measures ranging from the acquisition of foreign assets by Russian companies to their temporary seizure by state agencies. The latter measure is applicable if the assets are deemed critical for the country’s energy security.

The move was a response to similar actions by Western nations, including Germany and Poland. In June 2022, the German authorities took over Gazprom Germania. In November, Warsaw seized Gazprom’s 48% stake in the joint venture Europol GAZ, 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.

Lakra Sintez is said to be Russia’s biggest paintwork materials producer. It owns a number of paintwork and construction materials brands.

BASF is the world’s biggest chemical company, with revenue of $94.83 billion in 2023, according to German Statista. It employs 112,000 people around the world and has production facilities in 234 locations worldwide, according to its own data.

In March 2022, BASF announced it would withdraw from Russia and Belarus, citing the conflict between Moscow and Kiev. The company said it “strongly condemns the Russian attack on Ukraine.” It noted that “Russia and Belarus accounted for around 1 percent of BASF Group’s total sales” in 2021.

In 2023, the company announced a €7.3 billion ($7.9 billion) write-down due to its oil and gas subsidiary – Wintershall Dea – exiting Russia.

The German company has a history of questionable business practices. Its predecessor, IG Farben, which was created through BASF’s merger with five other companies, was involved in the production of Zyklon B, the gas used in the mass murder of people in the Nazi death camps.

BASF maintains on its website that IG Farben’s leadership, including the future board chairman of the re-established BASF, was unaware of “the misuse of pesticides for industrial mass extermination.”