Russia Is Seizing European Company Assets — What US Businesses Are Still At Risk?

In recent months, Russia began seizing assets from companies based in Western countries.

The most recent development came last week, when the Russian government seized the local operations of two of the world's largest consumer packaged goods manufacturers.

Assets belonging to French dairy product giant Danone DANOY and behemoth brewer Carlsberg CABGY were temporarily placed under control of Russia's Federal Agency for State Property Management, reported the WSJ.

The seizures were made possible after an April decree authorized the seizing of assets belonging to companies from states “unfriendly and contrary to international law.”

Straight after Russian head of state Vladimir Putin signed the April decree, Russia took over assets from two European companies: The Russian arm of German state-owned energy firm Uniper SE and assets of Finland's state-owned energy firm Fortum Oyj.

“The decree does not concern ownership issues and does not deprive owners of their assets,” wrote Russian News Agency TASS. The move came as an apparent retaliation to similar measures by European countries. 

In September, Germany seized the local refinery of Russian oil giant Rosneft PJSC. 

After the February 2022 invasion of Ukraine by Russian forces, the European Union froze over 200 billion euros ($221.5 billion) in assets from Russia's central bank. Last month, a summit of EU leaders was looking into ways it can route these assets to Ukraine's reconstruction efforts, reported Reuters.

US Companies Stuck Behind Enemy Lines

Recent Russian and European asset seizures are an economic escalation of the war on Ukrainian soil. With the latest round of seizures, Russia is further cementing its position as a "pariah" state. This has led many foreign-based companies to begin planning their escape routes in an effort to reduce the risk associated with having operations in Russia and mitigate possible losses of a higher order.

According to a report by the Yale School of Management, at least 1,000 companies based outside of Russia have announced plans to either leave the country or significantly reduce their operations there.

The U.S. has the largest number of companies announcing plans to fully leave Russia. These represent 32% of the whole group.

Ford F, IBM IBM, McDonalds MCD, Delta Airlines DAL, Nike NKE, United Airlines UAL, Starbucks SBUX, Hewlett Packard HPQ, Uber UBER, Netflix NFLX, American Airlines AAL and Dell DELL are just some of the American companies that have announced a full retreat from the country. 

Leaving Russia can be costly for foreign companies. As per a regulation set by Moscow in December, the Russian government will assess the value of assets for sale from foreign companies, and then oblige the company to sell them at a half-price discount, according to the WSJ.

Many other U.S. companies continue to operate in Russia. All are facing the potential risk of having some or all of their Russian assets seized, as lethal aid sent to Ukraine by the U.S. military puts the U.S. on Putin's "unfriendly country" list. 

Cloudflare Inc NET and Tupperware Brands Corp TUP continue to operate in Russia with business as usual, according to the Yale tracker. Other companies have announced minor measures, like reducing advertising or investment within the country, but continue to provide their services and products.  Consumer staple giants Procter & Gamble Co PG and Colgate-Palmolive CL published statements against the war on Ukraine but continue to operate in Russia. Ukrainian newspaper Ukrainska Pravda condemned the actions, saying that continuing operations in the country supports the Russian government by providing it with tax revenues. 

Kimberly Clark Corp KMB suspended new investments in Russia. Approximately 3% of the company's revenue comes from the Eurasian country.

Abbott Laboratories ABT suspended non-essential activities in the country but continues operations. Pfizer PFE and Merck MRK continue operations but have suspended new investment and clinical trials. Johnson and Johnson JNJ has suspended patient enrollment in clinical trials while Eli Lilly LLY has suspended clinical trials.

Other companies are already scaling back, with a proverbial foot out the door, though reducing operations can prove to be very costly.

Philip Morris International Inc. PM said it is exploring strategic alternatives while stopping a new investment plan of $150 million. The company has paused marketing efforts and canceled product launches.

The Coca-Cola Company KO has suspended certain operations but continues to operate some chains within Russia. PepsiCo PEP has suspended all but their essential operations while Kellogg's K has suspended operations except for essential products.

General Electric GE has stopped sales of everything but medical equipment in Russia while Whirlpool WHR has limited its production. John Deere DE, which gets 4% of its revenue from Russia, has suspended exports to the country.

Many other companies have suspended all operations. FedEx FDX and UPS UPS have stopped all shipments to Russia. Burger King, a subsidiary of Restaurant Brands International QSR, has stopped corporate support for its over 800 Russian franchises, which account for under 2% of the company's EBITDA.

Intel INTC, Qualcomm QCOM, Micron MU and Nvidia NVDA have suspended sales to Russia.

Apple AAPL, which gets approximately $7 billion of its $385 billion in revenue from Russia, has suspended all official site sales and shut down selected apps and services.

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