During a meeting with members of the all-Russian public organization “Business Russia” on Tuesday May 13th President Vladimir Putin said that the main condition for the return of Western companies should be to benefit Russia.
President Putin said that representatives of Western businesses were reaching out to him with requests to give them an opportunity to return to doing their business in Russia. Some companies, he said, left the country “with tears”. However, the president said, the return of Western business should be viewed pragmatically: if the resumption of work of any company will be unfavorable for Russia, there will be thousands of reasons to keep it out.
“And among these thousand reasons 999 will exactly meet WTO requirements, I assure you. And we will argue about every one of them in the courts. For 15 years at least,” – said the head of state at the meeting with members of ‘Business Russia’. He added that the behavior of foreign partners in previous 3 years should be taken into account before returning to Russia.
Western companies that intend to return to the Russian market should be “filtered”. This opinion was expressed by Boris Titov, the President’s Special Representative for Relations with International Organizations to Achieve Sustainable Development Goals. He clarified that the essence of this process is to realize the benefits of their return for the Russian economy.
The special representative of the President added that Vladimir Putin’s stand on the principle of “filtration” is important, and Russia came to it “by a very difficult and expensive route”. The Russian market will remain attractive for foreign companies if Western “artificial political obstacles” are removed, Boris Titov concluded.
Under what conditions foreign brands will be able to return to Russia? Some foreign companies have options to buy back their assets. Of the 100 largest foreign organizations, it was estimated that 18 have such rights. Some of them have an option expiring this year. As lawyers point out, the contracts should have spelled out the terms of repayment. However, President Vladimir Putin instructed to prepare an additional mechanism that would take into account the interests of Russian business.
According to “Vedomosti”, out of more than 1.5 thousand foreign companies that were operating in Russia in 2021, only 547 firms completely ceased their activities. Another 503 suspended operations, but retained the possibility of returning. However, only 18 of the top one hundred have an option to buy back assets. Thus, Hyundai and British American Tobacco have them until the end of the year. At the same time, the tobacco makers said back in 2024 that they might not have time to exercise their right. The German manufacturer of household chemicals Henkel has more time to think about it – 10 years. And formally, if the companies decide to return, it is easier, but not guaranteed to do so with the option.
The Ministry of Industry and Trade has already stated that “no one is welcome in Russia with open arms” and businesses will have to pay for their decisions. For example, AvtoVAZ said that Renault, which has a six-year option on a stake in the automaker, will have to pay 110 billion rubles. which is how much the Russian company invested in its development after the French left. In addition, since the asset will be transferred to legal entities from unfriendly countries, it will be necessary to obtain permission from a government legal commission. The legal commission will study a number of factors, such as the interests of the new owners, how much money was spent on the acquisition, how the buyout was carried out, and how the company departed from Russia.
Market participants did have a lot of questions about the way some companies left Russia. For example, Mercedes-Benz, closed its business overnight and left its customers without any support. At the same time, the German company also has an option on their old plant near Moscow. Google Corporation has completely severed ties with Russia. Sweden’s IKEA and H&M have no plans to return.
However, in truth, any discussions about the return of anyone to Russia are premature. At least as long as sanctions are in place and double taxation agreements with many unfriendly countries have been suspended. Time, patience and pragmatic thinking are the watchwords today and for the coming months.
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