| 15 July 2024, Monday |

Russia seizes more Western assets, narrowing options for company exits

Russia has temporarily taken control of the assets of the Finnish energy giant Fortum and its former German subsidiary Uniper, casting doubt on the fate of other Western corporations in Russia as pressure mounts on Moscow to impose more sanctions over Ukraine.

President Vladimir Putin signed a decree late Tuesday creating interim administration of the two European state-owned energy giants’ Russian holdings. Fortum stated it was “investigating,” and neither Uniper nor the German finance ministry responded immediately.

The decree – outlining possible retaliation if Russian assets abroad are seized – showed Moscow had already taken action against Uniper’s Russian division Unipro and Fortum’s assets. Russia made clear that the move could be reversed.

Moscow has reacted angrily to reports that Group of Seven nations are considering a near-total ban on exports to Russia, while many have called for far tougher sanctions to limit Russia’s ability to fight in Ukraine. The European Union is looking at using frozen Russian assets to rebuild Ukraine.

Uniper owns 83.73% of Unipro, which operates five power plants with a total capacity of over 11 gigawatts in Russia and about 4,300 employees.

Fortum is majority-owned by Finland, which joined the NATO military alliance early this month. Moscow said Finland had made a dangerous mistake.

The Finnish foreign ministry would not immediately comment on how Russia’s decision would reflect on relations between the two countries.

“Fortum’s current understanding is that the new decree does not affect the title (registered ownership) of the assets and companies in Russia,” the company said in a statement.

“However, it remains unclear how this affects e.g. Fortum’s Russian operations or the ongoing divestment process,” it added.

Fortum’s Russia division has seven thermal power plants in the Ural region and Western Siberia, while it also holds a portfolio of wind and solar plants in Russia, together with local venture partners. The book value of those assets stood at 1.7 billion euros ($1.87 billion) at the end of 2022.

Both companies have been trying to exit Russia. In February, Uniper valued its Unipro stake at a symbolic 1 euro to reflect the likelihood that a deal will not take place.

The decree said Russia needed to take urgent measures to respond to unspecified actions from the United States and others it said were “unfriendly and contrary to international law”. The two entities’ shares were placed in the temporary control of Rosimushchestvo, the federal government property agency.

State-owned Russian bank VTB this week said Russia should consider taking over and managing the assets of foreign companies such as Fortum, only returning them when sanctions are lifted. Fortum had previously flagged expropriation risk.

Rosimushchestvo said more foreign firms’ assets could come under temporary Russian control.

“The decree does not concern ownership issues and does not deprive owners of their assets. External management is temporary in nature and means the original owner no longer has the right to make management decisions,” the agency said.

Asset sales by investors from “unfriendly” countries – as Moscow terms those that imposed sanctions against Russia – require approval from a government commission and, in some cases, the president.

  • Reuters