Russian Experts Appreciate Putin’s Decree on External Management of Assets of Unfriendly Countries

Russian President Vladimir Putin signed a decree providing for the introduction of external management of the assets of unfriendly states located in Russia. The document has already been published on the official Internet portal of legal information and comes into force from the moment of signing.

It was the Kremlin’s response to attempts by a number of Western countries, led by the United States, to bypass international law to restrict companies and citizens of the Russian Federation in their property rights, as well as to create a regulatory framework for the transition from temporary management to the actual confiscation of Russian assets abroad. Last week, for example, the German Parliament passed an amendment to the law allowing the expropriation of Rosneft’s assets without their prior nationalization.

It is planned that the introduced measures will allow Moscow to create a compensation fund to offset the impressive damage from illegal expropriation. So, only in relation to the companies Rosneft and Gazprom, according to rough estimates of experts, this damage amounted to $22 billion.

The decree, signed by the head of state, provides that in the event of seizure or restriction of rights to Russian property abroad in relation to the assets of unfriendly countries, an external management procedure will be introduced in the Russian Federation. It will be implemented by the Federal Property Management Agency.

Temporary management, according to the document, can be applied to the movable and immovable property of foreign persons associated with unfriendly states, persons under their control, securities belonging to such foreign persons, as well as property rights located on the territory of Russia. Also, the provisions of the decree will be relevant in the event of a threat to the national security of the Russian Federation (economic, energy, threat to defense capability).

It is already known that the Decree of the President of the Russian Federation provides for the introduction of temporary management in respect of the shares of Unipro PJSC owned by the German Government (83.73%) and the shares of FORTUM PJSC owned by the Finnish concern (98.3%). But if necessary, the list of enterprises under external control can be expanded.

As Russian experts told MK, the presidential decree could help the Russian economy amid unprecedented restrictions from the West.

According to economist Nikita Krichevsky, the introduction of external management of assets with foreign participation will help maintain the investment climate in Russia and reduce the outflow of capital from the country, which, despite all the measures taken, reached a record level in 2022, doubling the level of 2014, and amounted to $217 billion.

“It is important that the Decree does not address issues of ownership and does not deprive the owners of their assets: external management is temporary and means that the original owner is deprived of the right to make management decisions, but not the right to own the asset. The external manager, in turn, receives powers that allow him to ensure the efficiency of the enterprises in accordance with their importance for the Russian economy. The purpose of the Decree is to form a compensation fund for the possible application of mirror measures in response to the illegal expropriation of Russian assets abroad,” the expert noted.

Deputy of the State Duma, economist Mikhail Delyagin recalled that in a number of Western countries, for quite a long time, a regulatory framework has been created for the actual seizure of assets of Russian companies abroad, and the temporary management of the assets of Russian companies is gradually developing into the actual confiscation of property.

“The Decree of the President is a timely response to these aggressive actions of the governments of unfriendly countries. In addition, the introduction of external management makes it possible to stop the risks of the negative impact of the political position of these countries on the operation of assets that are significant for the economic and energy security of Russia,” he said.

“This approach allows us to ensure the stable operation of companies that are significant for the national economy, whose foreign shareholders have already decided to distance themselves from Russian divisions as much as possible and have actually refused to participate in the corporate management of subsidiaries, and their representatives have left the Boards of Directors of the companies,” – summed up the MP.

“In the future, it will be possible to look at the behavior of our former Western partners,” notes Valery Andrianov, an expert at the InfoTEK analytical center, “and, depending on this, make one or another decision – from the withdrawal and forced sale of assets to the termination of temporary management and the removal of restrictions. Here, as Newton taught, action must be equal to reaction.

Such an approach, according to the expert, seems fair from all points of view and will be of a systemic nature. “It is impeccable from a legal standpoint, because, unlike Western sanctions, it is guided by the principle of “mirror imagery,” Andrianov continues. “It is also reasonable in economic terms. It would be strange if, in the context of the economic war actually unleashed against Russia, we would allow foreign companies not only to “remain with their own”, but to leave the Russian Federation with profits, more than recouping the funds invested in Russian enterprises and receiving a fair amount of profit from their sales.” For example, Fortum, according to the expert, acquired assets in Russia for $2 billion, thanks to the favorable conditions created for the enterprise, managed to build a high-margin business and planned to exit Russia for $8 billion.

“There is a clear political logic in the decree on external management. Absolutely absurd is the situation in which funds received from the activities of Russian assets go, for example, to German shareholders and the budget of the Federal Republic of Germany, and then to purchase weapons for the Armed Forces of Ukraine. Or, in the case of the Finnish side, – into service with a new NATO member, – the expert sums up.