The EU threatens sanctions for the purchase of assets of European companies seized by Russian authorities
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The EU threatens sanctions against buyers of assets of European companies in Russia if they were forcibly seized by Russian authorities. At the same time, EU countries will have the opportunity to confiscate already frozen Russian assets in favor of European companies that have lost business in Russia due to the actions of the authorities. Now in the Russian Federation, in particular, the shares of Unipro, Fortum, Danone Russia and Baltika are under the external management of the Federal Property Management Agency. The actions of the EU authorities may reduce the chances of some transactions, for example, NOVATEK’s acquisition of Shell’s share in the Sakhalin-2 project. But, according to lawyers, as a rule, buyers of European assets in the Russian Federation are either already under sanctions or are ready for them.
The EU intends to impose sanctions against Russian persons who receive assets of European companies in the Russian Federation as a result of forced seizure, follows from the 12th package of EU sanctions (published on December 18). We are talking about companies whose assets have been transferred to external management by the Federal Property Management Agency. The sanctions will also affect persons appointed to the management bodies of these companies. At the same time, the EU has provided for the possibility of confiscating the assets of Russian legal entities or individuals in order to use them to pay compensation to European companies that have lost assets in Russia.
After the outbreak of hostilities in Ukraine, many European companies announced their withdrawal from the Russian Federation, a significant part of them were able to sell their businesses, and many are still unable to complete the exit procedure.
But in a number of cases, the Russian authorities transferred assets to the temporary management of the Federal Property Management Agency: as a result, owners from unfriendly countries lost control over them, but not their ownership rights.
Thus, at the end of April, 83.73% of the shares of the generating company were transferred under the external management of the Federal Property Management Agency “Unipro” (owned by the German government through Uniper) and 98.23% of Fortum (owned by the Finnish concern Fortum), the new top management of both companies comes from Rosneft.
The Russian authorities explained the need to introduce external management by the attempts of the EU authorities to nationalize Russian assets in Europe. In particular, back in 2022, the German authorities introduced the practice of external management in relation to the assets of Gazprom (Securing Energy for Europe GmbH, former Gazprom Germania) and Rosneft (28.57% in the Bayernoil refinery, 24% in MiRo and a controlling stake at the Schwedt refinery). In Poland, the authorities even sold the former assets of NOVATEK in the country to the local company GELEO; the funds for the transaction were frozen.
In July, Russian assets were transferred to the management of the Federal Property Management Agency Danone and a brewing company owned by Carlsberg Group “Baltika”. After this, Deputy Chairman of the Government of Chechnya Yakub Zakriev was appointed general director of Danone Russia JSC, and its founder Taimuraz Bolloev was appointed president of Baltika. Carlsberg announced in June 2023 that it had signed an agreement to sell the business, but at the end of October, company CEO Jakob Aarup-Andersen said that the Russian authorities “stole the business.” And in early December, Vedomosti reported that Taimuraz Bolloev approached the head of the Federal Property Management Agency, Vadim Yakovenko, with a proposal to nationalize Baltika. However, in December, the head of the Ministry of Finance, Anton Siluanov, said that there are no such plans.
After the outbreak of hostilities in Ukraine, many equipment manufacturers stopped supplies to the Russian Federation and froze production in the country, including LG, Samsung, and Bosch.
According to Kommersant, the Ministry of Industry and Trade this year “gave LG and Samsung an ultimatum by January 1, 2024 to either resume production or sell it to interested companies.”
Otherwise, production may be transferred to external management. At the moment, the DNS store chain plans to rent an LG plant in the Moscow region in order to begin producing Chinese Konka household appliances there in the first quarter of 2024. Also in November, the Prime Print printing house (an asset of the Norwegian holding Amedia) was transferred under the temporary management of the Moscow government.
The threat of sanctions could reduce the prospects for a stake sale deal Shell in the Sakhalin-2 project (27.5% from Shell, the rest from Gazprom) to NOVATEK, despite the fact that Shell is a British company. Let us recall that in March NOVATEK received the consent of President Vladimir Putin for Shell to receive 94.8 billion rubles for its share, withdrawing this money from the Russian Federation. NOVATEK is not under US or EU sanctions and will likely not risk sanctions. However, the deal has already dragged on for a year and a half and, according to Kommersant’s interlocutors, is no longer in the area of primary interest of NOVATEK. The situation is similar with the Sakhalin-1 project, where the fate of the share remains unclear ExxonMobil (thirty%). The project has been transferred to the management of Rosneft’s Sakhalinmorneftegaz-Shelf structure, and the value of the American company’s share is still being assessed.
The acquirers of Unipro, Fortum, Danone Russia, Prime Print, and Baltika are at risk of sanctions, says Elena Mende, partner at the Smolenka 33 Bar Association: “The new sanctions are designed to have a deterrent effect on businessmen who could acquire similar assets.”
NSP lawyer Gleb Boyko believes that the new criterion for inclusion in the sanctions list will also apply to persons who entered the management bodies of Russian subsidiaries of European companies as a result of the application of the presidential decree. In addition, Elena Mende does not rule out that for the purposes of inclusion in the sanctions lists, informal discussions on the sale of an asset, the creation of unfavorable business conditions on the part of the Russian Federation, and the threat of criminal prosecution in Russia may also be taken into account. VERBA Legal Advisor Marat Samarsky emphasizes that determining the circle of possible sanctioned persons according to the new criterion is “an absolutely debatable issue.” According to Gleb Boyko, “the norm is formulated broadly and it is necessary to wait for the practice of its application by the EU Council.”
Elena Mende doubts that the new criterion will radically change the existing situation: “Too many Russian businesses are under sanctions, and those who managed to avoid this already understand the consequences of acquiring assets from European companies on non-market conditions.”
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