Russia Looks to Seize Western Companies Who Try to Leave

A bill is working its way through the Russian Duma that would allow Moscow to seize Western companies that threaten to leave Russia.

Most Western companies have already left, but the few that remain now face severe pressure to leave or give in.

The law would give the government broad powers to intervene “where there is a threat to local jobs or industry,” according to Reuters. It makes it “more difficult for western companies to disentangle themselves quickly unless they are prepared to take a big financial hit.”

The law to seize the property of foreign investors follows an exodus of western companies, such as Starbucks (SBUX.O), McDonald’s (MCD.N) and brewer AB InBev (ABI.BR), and increases pressure on those still there.

It comes as the Russian economy, increasingly cut-off due to western sanctions, plunges into recession amid double-digit inflation. read more

Italian lender UniCredit (CRDI.MI), Austrian bank Raiffeisen (RBIV.VI), the world’s biggest furniture brand, IKEA, fast food chain Burger King, and hundreds of smaller firms still have businesses in Russia. Any that try to leave face this tougher line.

The EU is proposing to toughen its own rules on the Russian sanctions, including stiffening the penalties for violating the sanctions regime. But some Russian politicians don’t get the connection between the sanctions and the war. Former president Dmitry Medvedev, who is now deputy chairman of Russia’s Security Council, has been particularly vocal about Western companies leaving, attacking “enemies who are now trying to limit our development and ruin our lives.”

In other words, it’s OK when Russia limits Ukraine’s development and ruins Ukrainian lives, but when you do it to us you’re an “enemy.”

The bill paves the way for Russia to appoint administrators over companies owned by foreigners in “unfriendly” countries, who want to quit Russia as the conflict with Ukraine drags down its economy.

Moscow typically refers to countries as “unfriendly” if they have imposed economic sanctions on Russia, meaning any firms in the European Union or United States are at risk.

First and foremost, those foreign companies pay their bills in hard currency. Russia is now just a matter of days from default because they’re being forced to pay their debts in rubles.

Aside from using rubles for toilet paper, they don’t have much value in the international marketplace. Russia is going to default, and they’re going to need plenty of scapegoats to blame.