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Russian Law Allowing Seizure of Western Businesses Suspended


Russian President Vladimir Putin | Image by Reuters

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Moscow’s proposed law providing authorities the power to take the assets of foreign corporations leaving the country did not pass before the summer break, giving firms additional time to make their exit.

The Russian parliament made any progress on the law improbable until at least mid-September, when the Duma, the lower house of parliament, will start to debate draft laws for its upcoming session.

Some experts question if the government will succeed in implementing the planned law.

Tatiana Stanovaya, the founder of political analysis firm R.Politik, said, “The fact that it only passed the first reading and got stuck means there is no consensus in the government about its further fate.”

The attempt at passing the law comes amid worries that Moscow is becoming increasingly antagonistic toward any remaining Western companies, stoked by President Vladimir Putin’s decision last month to take complete administrative control of the Sakhalin-2 gas and oil project.

It is unknown whether Putin could issue a broad decree to confiscate assets from other businesses.

According to Kremlin spokesman Dmitry Peskov, Russia monitors businesses departing businesses to ensure their legal commitments to workers are satisfied.

“The government is keeping very tight control over this, so one can say that work is well established there,” Peskov said on Tuesday.

As reported by The Dallas Express, the proposed rule would give Russia the power to step in and appoint administrators to manage foreign-owned businesses that wish to leave Russia to protect local jobs or industry.

First Deputy Prime Minister Andrei Belousov, who cautioned against allowing companies to “leave, lock the door and leave people without work and consumers without products,” supported it when it first received legislative approval in May.

The draft has now been suspended, but the parliament can still meet again in an emergency session. On Friday, they will meet in an extraordinary session to debate a variety of topics, including some pertaining to competition and information policy.

The particular laws that the Duma will examine on Friday are still unknown. On Tuesday, the Kremlin chose not to comment on the scheduled meeting.

On February 24, Russia began what it refers to as its “special military operation” in Ukraine. Putin has interpreted the Western sanctions against Russia and the business elite in Moscow as a declaration of economic war.

Putin has often threatened that Moscow will retaliate against sanctions, but as of yet, Western companies who continue to do business in Russia report little intervention.

Maria Shagina, a research fellow at the IISS think tank said, “In the beginning, there was very hawkish rhetoric on nationalization, expropriation, to counter the scope of Western sanctions … but then it faded.”

Businesses have been debating how to leave Russia in ways that minimize the financial damage, avoid jeopardizing the safety of their staff, and, in some cases, provide the possibility of returning in the future.

Western companies such as Nike and Cisco have accelerated their exit recently due to rumors that the Duma would soon implement the new regulations. The rule’s hiatus allows companies who remain more time to consider their options.    

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