Putin introduces a Foreign Governance Regulation on Western Companies

Russian President Vladimir Putin

President Vladimir Putin signed a decree on April 25 that allows for the temporary control of the Russian subsidiaries of two foreign energy firms. This action serves as a warning to the US and its allies to not seize Russian assets and is also a response to Western actions.

It also signals to other international companies that Moscow could take a similar action again if Russian assets abroad are seized.

Putin made this decision because it will help Russia protect its interests from Western actions. The decree stresses that Russia needed to take urgent measures to respond to the US and other states it recognises as “unfriendly” and act in “contrary to international law.”

“The decree does not concern ownership issues and does not deprive owners of their assets. External management is temporary in nature and means the original owner no longer has the right to make management decisions,” the statement added.

It is important to stress that this regulation does not allow confiscation, meaning Russia will not take anything away from anyone. The owners of Germany’s Uniper Russian division and Finland’s Fortum Oyj, the first two targeted companies, will retain their possessions. However, they will probably be managed by the Federal Agency for State Property Management (Rosimushchesto).

Moscow can safely assume that the West wants to continue extrajudicial seizures of Russian assets abroad. Despite this, Russia will not implement the same actions to those countries targeting Russia.

It is noted that Russian businesspeople and geopolitical experts have long appealed to the government to sign the decree because Russian property and frozen funds must be protected.

Now, Russia has made it clear that as soon as a hostile country tries to confiscate property, there will be a response, something that will instigate a backlash as Western businesspeople will lose patience with their country’s Russophobic policies.

In addition, the decree allows Russia to ensure the stable operation of companies that are significant for the national economy.

Although Moscow has already targeted Uniper’s division in Russia and the assets of Fortum Oyj, the list of properties over which temporary management is already being introduced can very easily be expanded in the near future.

This depends on how the relationship between Moscow and Washington develops. If there is an improvement, then this will only be a temporary management of shares, and if there is an escalation, then there is every reason to believe that they can be permanently confiscated.

It is recalled that European Council President Charles Michel said in October 2022 that the European Union was looking at using seized Russian assets — frozen under sanctions against Moscow — to help rebuild a post-war Ukraine. Then in February, US Treasury Secretary Janet Yellen said Moscow should bear the costs of the huge damage caused by the war.

However, she had to begrudgingly admit that there were “significant legal obstacles” in successfully confiscating major frozen Russian assets.

None-the-less, the German government last year brought the local branches of the Russian energy giants Gazprom and Rosneft under external control, with Poland quickly following suit by introducing external management on Gazprom and Novatek. Also, over $300 billion of Russian financial assets were frozen in US and EU banks, with the authorities threatening Moscow with the transfer of funds to Ukraine.

In the same light, the G7, seemingly pushed by Japan, are considering a near-total ban on exports to Russia, while many have called for tougher sanctions to limit Russia's ability to fight in Ukraine.

However, it is now Russia that has gone on the offensive. Following the decree, Uniper said it was reviewing the action against its Russian division Unipro. For their part, Fortum said it was investigating and had learned from its Russian subsidiary that the company's CEO had been replaced and the unit put under temporary asset management.