Legislation would reportedly allow domestic entities to deny asset buybacks to foreign firms under certain conditions

The Russian parliament is set to pass a law that would regulate the right of foreign companies to reclaim assets sold during their exit from the country, Izvestia reported on Tuesday. The draft has reportedly been approved by the Finance Ministry and will be considered by the State Duma in its second and third readings simultaneously.

Numerous US, European, and Asian companies pulled out of Russia due to supply problems caused by unprecedented sanctions imposed on Moscow by the West after the escalation of the Ukraine conflict in 2022. Other firms left due to the risk of facing secondary sanctions or public relations pressure.

The bill, reviewed by Izvestia, allows Russian authorities or current owners to reject asset buybacks under certain conditions. Grounds for refusal include the foreign seller being from a country that has imposed sanctions on Russia, the repurchase price being below market value, or if more than two years have elapsed since the original deal with the Russian owner fulfilling obligations to employees and creditors.

The Russian authorities may also block asset buybacks if a company operates in sectors deemed vital to the country's socio-economic stability, including defense or finance, the outlet said. In such cases, asset repurchase would require presidential approval.

According to Izvestia, the new measures will be voted on in June and could affect at least 18 foreign companies with buyback options, including Renault and McDonald's. The draft law also reportedly stipulates that foreign businesses denied repurchase could be eligible for compensation, the amount of which would be determined by the government. However, if former owners failed to fulfill obligations before their exit, compensation could be reduced by court decision.

In March, Russian President Vladimir Putin ordered the government to draft regulations for Western firms seeking to return to the country's market, which would prioritize the adequate protection of local businesses.

Following the exodus of foreign firms, the Russian market has largely adapted by promoting domestic and Chinese brands, making re-entry more challenging for Western companies. In sectors such as automotive and fashion, local alternatives have filled the void left by departing Western firms.

Putin said on Monday that foreign tech firms that continue operating in Russia while acting against the country should be "squeezed out."

"They are trying to squeeze us, so we must respond in kind," Putin said in response to a question about possible measures against companies such as Zoom and Microsoft. The president added that Russia had not expelled any companies and had instead created favorable conditions for their operations.

(RT.com)