Putin Wants Russia’s Largest Companies To Relocate To The East

Russian President Vladimir Putin has ordered plans to be developed for major state-run companies to relocate their headquarters from Moscow to other parts of the country. The move is aimed at boosting regional budgets, help alleviate labor shortages, and reflect the growing importance of Russian development towards Asia. De-centralization would also boost the economies of other regions.

Moscow is home to most of Russia’s state-run giants, including the country’s top lenders Sberbank and VTB, energy majors Gazprom and Rosneft, defense and technology giant Rostech, Russian Railways, and many others.

Putin ordered the development of a roadmap on the phased relocation of the head offices of major corporations and state companies to the regions to be completed by October, after which implementation reviews will be held. He suggested that companies should prioritize Siberia, the Urals, and the Far East.

The initiative to transfer company headquarters to the east of the country comes amid strengthening economic ties with Asia. Russia has redirected the bulk of its trade flows away from the EU following Western Ukraine-related sanctions.

Putin first raised the idea in 2021 and reiterated it during the St. Petersburg Economic Forum last month. Russian regions outside the capital need more economic opportunities, Putin stressed at the time.

He gave the example of RusHydro, one of the world’s biggest producers of hydro-electric power and whose portfolio includes geothermal power plants in Kamchatka, which is moving 1,500 head office jobs to the Siberian city of Krasnoyarsk.

Depending on the scale of the company, the relocations could take up to ten years and would give a boost to regions, especially where unemployment rates are high, according to analysts.

Another prime candidate for relocation is Rostech which deals with security equipment and has a rapidly growing market in Southeast Asia. The second most powerful state corporation is Russian Railways, which has already overseen maximum development in European Russia however is heavily involved in new infrastructure projects across Siberia and the Russian Far East. There are many others.

In essence, Putin’s move is an acknowledgement that Russian growth and development is now moving away from the traditional power bases in European Russia and towards Asia. While Moscow will remain Russia’s political and financial capital, corporate development is required elsewhere. This will provide a significant boom to several more eastern Russian cities such as Novosibirsk, Irkutsk, Krasnoyarsk, Khabarovsk and Vladivostok – all major hubs with connections to Central Asia and China. The Russian Far East now accounts for more than 30% of Russia’s total Foreign Direct Investment. Vladivostok in particular is capable of developing as Russia’s east coast equivalent of Shanghai.