PressSplit
European companies are having problems withdrawing from Russia. The Kremlin collects high taxes. Now Auchan is in his sights.
Moscow – Since the start of the war in Ukraine, Ukraine’s western allies have adopted more than a dozen sanctions packages. These are intended to weaken Russia’s economy by introducing trade restrictions. Western companies had turned their backs on Russia en masse, either for economic or ideological reasons. However, many remained. Partly because they can’t help it, partly out of conviction, partly because selling is difficult. A more recent case may involve Gazprombank.
Difficult exit from Russia’s economy – Russia makes the withdrawal more expensive
This time it hits the Auchan company, a French department store chain that has around ten percent of its global sales in Russia. At least that was the situation before Russian President Vladimir Putin started the war in Ukraine. Like the French one The World reported that a “local buyer” is planning to purchase Auchan’s Russian business. This could be Gazprombank, which is under Western sanctions.
Vladimir Putin in Moscow (symbolic photo). European companies find it difficult to leave Russia. The Kremlin collects high taxes. Now it hits Auchan. © IMAGO/Mikhail Metzel/Kremlin Pool
Auchan is currently in final negotiations to sell its Russian business to a Russian buyer. The deal is expected to be concluded within the coming weeks. That had Kyiv Independent reported on October 26, citing French media.
In addition to Auchan, a number of other Western companies continue to operate in Russia. Many other companies left the country because of the war in Ukraine. Those who stayed report difficulty getting out. Among other things, this is because the Kremlin has made the exit increasingly complicated. A so-called exit tax also makes exiting Russia’s economy more expensive than before.
Risks in Russia’s economy – Western companies also affected
Companies that still operate in Russia are faced with two particular financial risks. On the one hand, this is about the exit tax already mentioned. Specifically, it works as follows: Companies that want to leave Russia must make a one-off payment. This was initially ten percent of the sales price, but later this amount increased dramatically.
The news agency Reuters reported in mid-October that in the future it could amount to up to 35 percent of the market value of companies’ Russian subsidiaries. She referred to unnamed sources. Russia has made it increasingly difficult for Western companies to exit in order to keep them in the country, and the Kremlin has demanded steep price discounts on partial sales before agreeing to the sales.
On the other hand, Western sanctions pose a risk to companies in Russia. According to the US State Department, companies risk “severe punitive measures” under both the economic sanctions and export controls and import restrictions that the US and its partners have imposed on Russia. “Russia can also force companies to participate in military mobilization,” the ministry warned.
Western companies pay billions to the Kremlin – the risk of expropriation hangs over everyone
For Western companies, the exit from Russia can mean short-term losses. Loud Reuters Companies had to write off around $107 billion since 2022 because they had withdrawn from Russia. This is what a company analysis revealed. However, anyone who stays could also suffer the same fate as the mechanical engineer DMG Mori. Vladimir Putin quickly expropriated this property.
