Russian President Vladimir Putin has signed decrees giving his government the power to seize and forcefully sell billions of dollars in assets owned by European energy companies to new state-approved owners.
in decree On Wednesday, the Kremlin issued an order to establish new Russian-managed companies to acquire shares in the huge Yuzhno Russkoye oil and gas field, currently owned by Austrian OMV and German Wintershall. The two European energy giants, both from countries Moscow claims are “unfriendly” following its all-out invasion of Ukraine, have a 60% stake in the drilling site in Russia’s icy far north.
While the companies will theoretically be compensated for their investments, the amount they will receive from the sale will be determined by the Russian state, in a move that represents the largest asset seizure in the country’s modern history.
Earlier this year, the Kremlin established a legal framework to confiscate assets owned by foreigners as it seeks to shore up its economy in the face of Western sanctions. In the wake of the decision, former Russian oil and gas tycoon Mikhail Khodorkovsky, whose energy empire was dismantled and imprisoned as a result of his opposition to Putin, told Politico that there were now no legal protections for foreign companies.
“There are no guarantees of the safety of investments anywhere, but Vladimir Putin’s regime has clearly succeeded in building an illegitimate and lawless state,” he said at the time.
Many Western energy companies have announced their complete withdrawal from Russia since the war began in February 2022, including the American company Exxon Mobil and the Norwegian company Equinor. However, other companies such as Shell, BP, Total Energies and Wintershall have found the practicalities of winding down their businesses in the country and recovering their money to be a challenge.
Experts warn that the lack of Western investment, along with this the ban On key equipment and technologies for oil and gas exploration and drilling, means Russia’s leading fossil fuel sector is likely to face a long-term decline in productivity, despite sanctions loopholes and rising oil and gas prices.
On the other hand, the Kremlin has already seized assets owned by Western companies such as Danone and Carlsberg following their decision to leave the market, handing windfalls to close allies of Putin and their families.
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