A bartender holds a glass of Carlsberg beer in a bar in St. Petersburg, Russia.
Alexander Demianchuk | Russia
Ukraine is urging global firms to divest from Russia and relocate to its war-stricken neighbor, as Moscow continues to seize the assets of foreign firms.
Russian President Vladimir Putin signed a decree on Sunday for the federal government to seize control of the Russian subsidiaries of French food producer Danone and Danish brewer Carlsberg, taking the businesses’ shares under “temporary administration.”
Around 1,000 international firms began the strategy of leaving Russia after its illegal invasion of Ukraine in February 2022, but many have yet to successfully sell their assets within the country.
Sunday’s move was the primary time that Russia has taken hold of the subsidiaries of Western firms because it seized Finnish and German energy firms Fortum and Uniper in April. The Kremlin has previously suggested that this was retaliation for Western seizures of Russian assets.
Sergiy Tsivkach is the CEO of UkraineInvest, a government agency tasked with attracting foreign direct investment to Ukraine and promoting the country as a secure long-term investment option for international business.
“We’re most enthusiastic about those [companies] that stopped investment plans in Russia,” Tsivkach told CNBC via videolink from Kyiv late last month.
“We identified about 200 global firms that ceased investment activities in Russia and we’re in contact with them with the intention to provide the likelihood to construct manufacturing facilities in Ukraine as an alternative of Russia.”
Tsivkach also called for more firms with operations in Russia to tug out, urging CEOs to look not only at the moral implications, but additionally the business case for fully divesting.
“We understand that there could also be difficulties with selling your businesses and leaving Russia, but that must be top on the list of the agenda of each CEO of a world company that also operates in Ukraine,” he said.
“It is necessary to point out that the aggressor cannot receive any investments or any operations from international firms.”
Over 1,000 firms have publicly announced that they’re voluntarily curtailing operations in Russia beyond the bare minimum required by international sanctions, based on the Yale School of Management, but some have continued operating undeterred.
“I feel they should make a quicker decision, since it isn’t only about ending the war, our victory and the tip of hostilities, that is in regards to the inability of any reputable international company to operate in Russia through the war and after the war,” Tsivkach said.
“A rustic that illegally invaded its neighbor for no reason can’t be trusted by any private businesses, because their assets will be arrested without reason in the end, nationalized, so firms need to grasp that Russia isn’t a business partner that you would be able to depend on.”
Carlsberg and Danone seizures
Tsivkach was speaking before Russia’s seizure of Carlsberg-owned Baltika Breweries and Danone Russia, each of which at the moment are under the control of the Russian Federal Agency and state property agency Rosimushchestvo, per Putin’s decree.
Carlsberg said in a press release Sunday that it should “assess the legal and operational consequences of this development and take all needed actions in response.”
The corporate announced on Mar. 28, 2022 that it might seek a full disposal of its business in Russia, and signed an agreement on Jun. 23, 2023 to sell the subsidiary, although this was awaiting regulatory approval.
Carlsberg said the prospects for the sale process at the moment are “highly uncertain” and that it’s “within the strategy of obtaining more detailed information.”
Danone also said it was investigating the situation, having began transferring control of its business within the country to a Russian entity in October last yr.
“Danone is preparing to take all needed measures to guard its rights as shareholder of Danone Russia, and the continuity of the operations of the business within the interest of all stakeholders, particularly its employees,” the corporate said on Sunday.
Russia also on Monday axed the Black Sea Grain Initiative, a key humanitarian corridor delivering Ukrainian grains to global markets, hours before the expiry of the U.N.-brokered deal.
Given the unpredictability related to retaining operations in Russia, Tsivkach suggested that it may very well be a long time before firms see enough of a business case to contemplate returning to the country.
‘Your war investment may very well be worn out’
Ukraine’s allies pledged nearly $60 billion toward the country’s recovery and reconstruction on the Ukraine Recovery Conference in London in June. UkraineInvest, meanwhile, is currently overseeing 17 investment projects value over $2.3 billion.
Nevertheless, with no end to the war in sight, many investors are reticent about investing within the country.
David Roche, veteran investor and president of Independent Strategy, told CNBC last week that the investment needed to secure Ukraine’s future needs to return not from businesses, but from NATO.
At a summit in Vilnius, Lithuania, earlier this month, the 31-member military alliance granted more arms to Ukraine, but Roche argued that the arms promised weren’t the long-range missiles that may very well be pivotal in helping Ukraine win the war.
Tensions also arose between leaders as Ukrainian President Volodymyr Zelenskyy bemoaned the shortage of a timeline for Kyiv to hitch NATO.
“We’re still arming Ukraine to proceed to not lose this war, but we’re not arming it to win this war, and I feel that may be a very essential shortfall,” Roche said.
“If you happen to were going to finance the rebuilding of Ukraine, you wouldn’t put a penny into Ukraine unless it had long-term guarantees from NATO, because your war investment may very well be worn out. It’s often ignored but it’s extremely essential — is NATO fulfilling the guarantees that are needed to get the private sector to step into Ukraine? And I feel the reply is not any.”
He added that a protracted war is in Russia’s interest, since NATO won’t allow Ukraine to hitch the alliance while it remains to be embroiled in live conflict.
“Yes, we now have seen Sweden coming into the Alliance and we have seen Turkey seemingly changing direction and supporting the West rather more openly, but we now have not seen the actual clincher which is the safety issue for Ukraine,” Roche said.
