Western companies that are looking to leave Russia and sell their assets in the country will have to make a 15% contribution to the state budget, according to a report by Izvestia citing the Finance Ministry. The director of the ministry’s Department of Financial Policy, Ivan Chebeskov, stated that this share will be calculated based on the full market value of the company’s assets. The ruling by the Commission on Foreign Investments is expected to be released in the near future.
These exit rules for Western firms come as Moscow has toughened its stance, demanding a 50% discount on all foreign deals and a contribution of at least 10% of the sale price to the Russian budget. Currently, foreign companies from “unfriendly” countries who want to leave Russia need permission from a government commission.
According to Reuters, foreign firms have already encountered losses of over $80 billion from their Russian operations due to write-downs and lost revenue. The corporate exodus has presented a significant windfall for Russian entrepreneurs, as well as competitors and former business partners of Western companies, said Aleksey Kupriyanov of Aspring Capital, which has advised the Russian government on numerous deals.
The exodus of Western firms from the Russian market intensified following the start of Moscow’s military operation in Ukraine, driven by sanctions. Since then, Russia has focused more on non-Western partners, particularly China and India.
The new requirement for departing firms to contribute 15% of the value of their business sale to the country’s budget is likely to have significant implications for Western companies. It may discourage some firms from leaving Russia or force them to reconsider their exit strategies. The contribution will ensure that the state benefits financially from these transactions and could also serve as leverage to further strengthen Russia’s economic position.
While the exact details of the ruling by the Commission on Foreign Investments are yet to be released, it is expected that the contribution will apply to all Western companies selling their assets in Russia. The calculation of the contribution based on the full market value of the company’s assets ensures a fair assessment and prevents companies from undervaluing their assets to reduce the contribution amount.
This move by Russia reflects its determination to assert its economic sovereignty and reduce its reliance on Western companies. By imposing financial obligations on departing firms, Russia aims to maximize the benefits of their exit for its own economy and potentially incentivize them to reconsider their decision to leave.
The impact of these new rules on Western companies and the Russian market remains to be seen. It is likely that some firms will face increased financial burdens, while others may explore alternative strategies or partnerships to navigate these challenges. As Russia continues to strengthen its alliances with non-Western partners, it is clear that the dynamics of the country’s business landscape are evolving.