(NewsGlobal.com)- While many Western businesses have exited the Russian market since the invasion of Ukraine, around 47 of the 200 largest global companies continue to do business in or with Russia. And now, some experts suggest that the companies that remained may face a heightened risk of expropriation and nationalization as Moscow grapples with a way to deal with the mass corporate exodus.
Recently, the Kremlin indicated it was willing to take drastic steps against businesses to tighten its control of the economy. And while the remaining companies are considering whether or not to stay in Russia, the Kremlin might decide for them.
In July, Russian President Vladimir Putin signed a decree allowing the Russian government to seize the Sakhalin-2 oil and natural gas project which would give the government the power to strip foreign investors of their rights. Among those investors with double-digit stakes in the project are UK energy giant Shell and Japanese trading firm Mitsui and Mitsubishi.
The Japanese trading firms lost over $1 billion on their Sakhalin-2 assets after the valuation was downgraded due to Putin’s decree.
According to Mark Dixon, the founder of the Moral Rating Agency which focuses on foreign firms in Russia, Putin’s decree shows that Moscow isn’t just willing to expropriate foreign assets but will also position itself to engage in “expropriation blackmail.”
Dixon told Fortune magazine last week that Moscow is giving foreign investors and businesses the chance to either agree with the new terms like those of Sakhalin-2 or lose everything.
Dixon had warned earlier this year that there could be a “tsunami of expropriations or blackmailed concessions over the next couple of months.”
Other economists agree with Dixon’s assessment.
According to economist Anders Åslund, the author of “Russia’s Crony Capitalism,” Moscow will nationalize “one foreign company after another” since no other options are available. This nationalization amounts to expropriation or confiscation by the state.
Åslund told Fortune magazine that Russian assets can’t be sold easily since so many foreign buyers have exited the Russian marketplace.
Moscow naturally denies that it plans to expropriate or nationalize the assets of foreign firms.
But even if Russia doesn’t plan to nationalize firms, Åslund told Fortune the risk of expropriation remains since the Kremlin has no alternative.