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EU, Germany and US target: Russia threatens to nationalize companies

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Russia threatens to nationalize companies

Many Western companies are turning their backs on Russia, at least temporarily. The Security Council is threatening to “nationalize property” so people don’t end up on the streets, they say. This may also affect German companies like VW. In addition, the companies fear counter-sanctions from the Russians.

Western companies leaving the country due to Russia’s war against Ukraine now face the nationalization of their factories and production facilities. The companies “practically leave their groups to their fate,” said former Russian President Dmitry Medvedev. Therefore, the Russian government is working on steps to initiate the bankruptcy of companies and then the nationalization of property, said the deputy head of the Russian Security Council. The main task is that people do not end up on the street.

Medvedev said the new production had to be established “on the basis of assets left behind by panicked investors.” “Such an approach is objective and fair.” Companies from Germany, other EU countries and the US are affected.

For example, Volkswagen stopped its business in Russia last week. The production and export of vehicles to Russia has been suspended until further notice. The manufacturer operates its own car production facilities in Kaluga, southwest of Moscow, and in Nizhny Novgorod, further east. VW CEO Herbert Diess was in favor of “maximum sanctions”, which should be complemented by negotiations.

Diess: Effects more severe than in the pandemic

According to Diess, Russia’s war against Ukraine could have even more serious effects on the European economy than the Corona crisis. Permanently damaged global supply chains are likely to lead to “massive price increases, energy shortages and inflation,” the Financial Times manager said. In many countries, the fallout from the attack on Ukraine has already slowed production by automakers because there are no spare parts suppliers. In addition, the war caused major disruptions in commodity markets. Oil, gas and commodity prices continued to rise, with companies fearing shortages of critical parts and supplies.

There is still no specific law in Russia to nationalize the assets of companies that have withdrawn for the time being. But calls from prominent politicians to respond to Western sanctions in this way are increasing, and growing louder. The Russian parliament was expected to decide soon on such a course of action.

Many Western companies initially only announced that operations would be suspended. In most cases it was not an irrevocable withdrawal. “Whatever the reasons for leaving, foreign companies must understand that returning to our market will no longer be easy,” Medvedev said.

One in three companies affected by counter-sanctions

According to the Interfax agency, Kremlin spokesman Dmitry Peskov warned that nationalizing Western companies and confiscating their assets would have negative consequences for both sides. Russian companies are also threatened with the confiscation of their assets abroad. There are also now suggestions that the assets will be held in trust due to sanctions.

The fallout from the Ukraine war is also putting pressure on Germany’s exporters and wholesalers. According to a survey by the Federal Foreign and Wholesale Trade Association (BGA), almost a third of companies are affected by sanctions against Russia and counter-sanctions. “The consequences of the corona pandemic have not yet been overcome. The economic recovery in Germany is slowing down even more due to the war and the imposed sanctions,” said BGA President Dirk Jandura.

However, the vast majority of companies support sanctions. Relations with Russia represent only three percent of German foreign trade. “But in a networked economy, the effects often go further,” Jandura said. For example, companies reported restrictions on aluminum trade or missing grain deliveries, disrupted supply chains, or a lack of truckers, many of whom came from Ukraine.

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