Non-refundable ticket to the West without luggage – Newspaper Kommersant No. 53 (7498) dated 03/29/2023

The tightening by the Russian authorities of the rules for the exit of foreign owners from assets in the Russian Federation will have little effect on the speed of their exodus from the market – there are no new powerful incentives for this, and complications will rather delay the process both in the interests of the Russian authorities and the companies themselves, experts say. They compare the introduction of a mandatory contribution to the budget from 10% of the company’s value on the market as a condition for exiting with a tax on excess profits for Russian companies – foreigners in 2022 were also able to earn on the conjuncture. The benefit of such a contribution, however, is also ambiguous. On the one hand, it will eliminate the practice of overvaluing a business in order to sell it at a significant discount and result in additional losses for investors; on the other hand, it can provoke gray settlements between sellers and buyers.

A subcommittee of the government commission for the control of foreign investment in the Russian Federation has adjusted the rules for the alienation of Russian assets by foreign persons from unfriendly countries. Now foreigners selling their Russian assets, in addition to the discount to buyers, must make a mandatory contribution to the budget. This decision was made on March 2, follows from the minutes of the meeting of the subcommittee with the participation of the head of the Ministry of Finance Anton Siluanov, the head of the expert department of the president Vladimir Simonenko, the first deputy head of the Ministry of Economy Ilya Torosov and the deputy head of the Central Bank Olga Polyakova.

The subcommittee, we recall, is engaged in the coordination of transactions with residents from unfriendly countries – in the general case, they are impossible due to anti-sanction measures. At the end of December, the subcommittee already discussed the idea of ​​a contribution to the budget under a number of conditions, but now non-residents will have to pay it anyway. The Ministry of Finance explained to Kommersant that the goal was to systematize the conditions for a contribution to the budget, taking into account different ranges of discounts in relation to an independent evaluation of transactions.

The amount of the contribution, according to the protocol, in the general case will be at least 10% of half of the market value of the assets indicated in the valuation report, that is, up to 5% of the asset’s value. But if the asset is sold at a discount of more than 90%, the fee will increase – at least 10% of the market value of the asset. “Sometimes when selling assets, the discount can be high due to the terms of the deal, which minimizes the price of the asset. In this case, the contribution to the budget may be higher, ”the Ministry of Finance explains the logic.

Whether the new requirement will apply to all the exit deals being discussed now, government officials do not say, however, according to Kommersant’s interlocutor in the economic bloc, they perceive the norm as a general rule and separately pay attention to the fact that a ten percent fee is “lower bar” contribution to the budget.

If earlier, when overestimating a business, it was possible to show a serious discount to the subcommission, now this will result in additional losses for non-residents, Igor Mazilin, managing partner of INGVARR, believes. However, tightening the rules could make things worse. Platforma.Legal partner Vlad Surkov believes that leaving on tougher terms can provoke corruption and gray settlements between buyers and sellers.

The amendments could be a reaction to the tactics of Western countries that have developed in recent months to “squeeze out” the remnants of foreign business from Russia – many foreign companies complain about the growing pressure in their “home” jurisdictions, Vlad Surkov confirms. “As a rule, this pressure is not legal—there are no mandatory exit orders—but public pressure. We know many examples of companies from unfriendly countries that have decided not to leave Russia and at the same time ignore pressure from the “international community”. Those who leave decided that it was easier for them to leave than to explain themselves to regulators and the public in their countries,” he explains. Ekaterina Makeeva, head of the AB A-PRO sanctions practice, recalls that the ADEO group announced the transfer of control over the Leroy Merlin chain of stores after an article in the Le Monde newspaper accusing it of developing Russian business in 2022. Raiffeisen Bank is discussing the termination of business in Russia after being pressured by the ECB. However, “it should be noted that both companies received a significant profit over the past year, significantly exceeding the results of previous years. In conditions when Russian businesses are offered to pay a one-time contribution to the budget, the decision to collect such a contribution from leaving “foreigners” looks logical,” she adds.

Denis Surovtsev, director of investment and capital markets at Kept, recalls that most of the major players from unfriendly countries have already sold or closed Russian divisions or are in the process of preparing for this. The number of new exit decisions is declining, as the circle of companies that are still present on the Russian market is narrowing. “For the remaining Western investors, there have been no additional stronger incentives to exit recently. Their decisions will depend on the further development of the geopolitical situation and the adopted sanctions and counter-sanctions,” he notes.

At the end of 2022, the share of foreign companies that completely left the Russian market was about 8.5% of 1.4 thousand relatively large enterprises from the G7 countries and the EU. At the same time, experts considered the growth of this share in 2023 to 20-25% unlikely due to capital restrictions and the lack of buyers. Therefore, de facto, the commission’s demands may turn out to be a measure to further conserve the situation and delay the departure of foreigners – both in the interests of the Russian authorities and the companies themselves. Thus, although the payment of a “voluntary” contribution is most likely not a violation of sanctions, companies may have issues that require coordination with foreign “sanctions” regulators. “For example, in the March clarification, the US Bureau of Industry and Security draws attention to the fact that when determining the fate of property remaining on the territory of the Russian Federation, subject to export control, if the export of such property is unnecessarily costly for the company, its fate must be agreed with BIS. When making a decision, the national interests of the United States and the possible benefits of the Russian government should be taken into account,” says Ekaterina Makeeva.

Diana Galieva, Oleg Sapozhkov