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Euro Post. > Blog > My Europe > EU Policies > Will nationalization of foreign companies be Russia’s response to European sanctions?
EU Policies

Will nationalization of foreign companies be Russia’s response to European sanctions?

World News
By World News Published November 15, 2023
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Russian President Vladimir Putin has been issuing several decrees with the aim of imposing a host of restrictions related to foreign capital and companies in Russia. Of course, the Russian measures come in response to the packages of sanctions imposed by Europe on Moscow since the start of the latter’s war on Ukraine in February 2022. The Russian measures have pushed to the fore an important question: Could the Russian measures in response to those of Europe include the nationalization of companies?

Since the start of the Russian war on Ukraine more than a year and a half ago, the economy has been another arena of the war between the West and Russia, with Europe imposing strong sanctions on Russia while at the same time working to secure gas needs from places other than Moscow.

Economic analysts suggest that Russia won’t move forward with nationalizing the foreign companies at the moment. They contended that the measures being taken by the Russian president are nothing more than a tool for political maneuvering. Still, they contended that Russia will seize all the Western investments in case the Western nations refuse to unfreeze the Russian assets after the dispute ends.

Vladimir Putin, the president of Russia, recently signed a law last August permitting foreign participants from hostile nations to be excluded from the ownership structure of significant Russian banks and companies. Putin also recently issued a decree allowing Russian investors to “exchange” their frozen assets abroad for those belonging to foreign companies frozen in Russia.

Months after enforcing the same move against the German Uniper and Finnish Fortum enterprises, Russia last July seized local companies connected to the French company Danone, in addition to the beer giant Carlsberg.

Despite the commentators ruling out Russia, would nationalize the European assets for the time being. Forecasting such a step by Russia isn’t without a reason.

Moscow said in March of last year that it had approved the first step toward nationalizing foreign businesses that had left the country. The Russian government’s first move toward nationalizing the assets of foreign corporations that have left the country has been approved, according to the ruling United Russia party. The party also stated that, in order to keep businesses from going bankrupt and to preserve jobs, a draft law that would allow foreigners from “unfriendly countries” to own more than 25% of a company’s shares could be included in the Foreign Affairs Department.

Additionally, in March of last year, the Russian President passed a bill giving Russian airlines authority over foreign-leased aircraft. Russian Airlines is mostly dependent on leasing aircraft from Airbus and Boeing. Out of the 980 passenger aircraft in operation, 777 are leased, including 515 aircraft from European and American corporations whose market value is estimated to be around $10 billion.

However, President Putin’s move to swap foreign assets held within Russia for Russian assets held abroad is a more complicated move than a straightforward fix for the issue of Russian investors’ frozen overseas assets. This covers both executive and legal criteria for determining the combined worth of Russian and international assets, in addition to the final agreement on the ruble’s exchange rate. After the Russian ruble lost 55% of its value against the US dollar in a single year, it now trades at 92 rubles per dollar and has dropped by almost 30% since the start of this year. This provides a fair value to people who are inside Russia.

To conclude, the Russian move to nationalize European companies on its soil in response to the European sanctions is unlikely in the short run. It involves legal and executive complexities. However, the move isn’t totally ruled out since Putin aims to strike at the Western economies that provide its enemy Ukraine with weapons, political protection, and economic aid.

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World News November 15, 2023 November 15, 2023
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