Latest proposal from European Commission would penalize those who took control of Russia-based branches of EU firms.
Russians who seized parts of European companies after Vladimir Putin’s invasion of Ukraine would be sanctioned under proposals put forward by the European Commission.
Businesses such as the Danish brewer Carlsberg, French food manufacturer Danone and German sportswear company Adidas were among those who had their Russia-based operations taken over by the Kremlin over national security concerns.
Until now, the EU has not been able to penalize people who profited from the seizures. But that will change if the bloc’s governments approve the Commission’s latest sanctions plans contained in a document seen by POLITICO.
Since the start of the war last year, Brussels has pushed through 11 waves of sanctions against Moscow — covering sectors from energy to banking — in an effort to empty Putin’s war chest and penalize his cronies. The 12th package, proposed by the Commission last week and due to come into force by the end of the year, mainly focuses on banning the import of Russian diamonds to Europe.
The EU would be able to target people or bodies “benefiting from the compulsory transfer of ownership or control over entities established in Russia, which were previously owned or controlled by Union persons,” according to the text, which was discussed by EU envoys last Friday.
Friends of Putin
Since February 2022, the Russian state has seized 93 foreign businesses and taken hold of Western-owned assets worth over $400 million, according to the Russian news agency TASS.
The new state-owned companies are usually placed in the hands of Kremlin acolytes. One example is 32-year-old Yakub Zakriev — a relative of Chechen leader Ramzan Kadyrov and an ally of Putin — who was appointed to both the head of Danone and Carlsberg’s Russian operations.
The EU cannot freeze or confiscate assets in Russia as its sanctions have no effect outside Europe, nor can it force the new owners to hand back the seized assets, but the thinking is that sanctions would discourage them from accepting the concession from the Russian state in the first place.
“If they engage in this transaction then they will be automatically on the sanctions list, with all the consequences for the company and for the owners, including financial restrictions and travel restrictions,” Svitlana Taran, a researcher at the European Policy Centre, a Brussels-based think tank, said.
The Commission’s proposal would technically allow the European owners of the seized company to receive compensation from the Russian state but this is unlikely to happen as it would rely on the Kremlin making an offer, said an EU diplomat, speaking on condition of anonymity,