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Kremlin could seize Russian assets from US companies, moral rating agency warns

Russian assets of major global companies could be seized by the Kremlin amid continued fallout from Russia’s invasion of Ukraine, new research suggests.

With the war now in its sixth month, the Moral Rating Agency has released new data on 47 of the world’s biggest companies, which it says have assets at risk. The agency was created to examine whether companies’ promises to leave Russia have materialized, and its research includes both US and foreign companies.

Moral Rating Agency founder Mark Dixon points to the Kremlin’s recent decision to tighten its grip on the Sakhalin-2 oil and gas project as evidence of its willingness to expropriate assets from foreign companies. Russian President Vladimir Putin has signed a decree ordering the transfer of the Sakhalin Energy Investment Company to a new Russian entity. The decree means the Kremlin now has an effective veto over which foreign investors will be allowed to retain their stake in the project.

Around 50% of Sakhalin Energy is owned by Russia’s state-owned gas company Gazprom RU:GAZP,
who will be allowed to keep his participation. Shell SHEL,
+2.88%
announced that it would sell its 27.5% stake in Sakhalin Energy. Mitsui 8031 ​​from Japan,
-0.67%
and Mitsubishi 8058,
-0.33%
respectively hold 12.5% ​​and 10% of the capital.

See now: Despite much talk, many US companies still haven’t fully exited Russia : Moral Rating Agency

“The executive order demonstrates that Russia is not only willing to expropriate assets, but is also positioning itself to engage in ‘expropriation blackmail,'” Dixon said in a statement.

Among the companies surveyed, the Moral Rating Agency identified General Electric Co. GE,
+2.90%,
PepsiCo Inc.PEP,
+0.08%
and Boeing Co. BA,
+0.40%
as in danger of being expropriated.

A General Electric healthcare maker in Russia could be a target for the Kremlin, the agency said. In response, GE directed MarketWatch to the company’s Russian footprint statement released in March.

“We are suspending our operations in Russia, with the exception of providing essential medical equipment and supporting existing electrical services to people in the region,” he said at the time. “We continue to work closely with relevant authorities to ensure compliance with sanctions as well as all laws and regulations.”

See now: Apple has ended imports of gold and tungsten from Russia

The moral rating agency also highlighted a PepsiCo snacks facility in Novosibirsk and a dairy factory in Moscow as being at risk.

In March, PepsiCo suspended production and sales of Pepsi Cola and its other global beverage brands, including 7-Up and Mirinda, in Russia. The food and beverage giant also suspended capital investments and all advertising and promotional activities in Russia.

Citing a PepsiCo spokesperson, the Just Food website later reported that PepsiCo had suspended further investment in the recently opened Novosibirsk plant.

PepsiCo’s 2021 annual report lists the Moscow dairy plant as well as a food plant in Kashira, which is in the Moscow region.

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PepsiCo has not yet responded to a request for comment from MarketWatch on the moral rating agency’s research.

Boeing assets have also been identified by the Agency as possible Kremlin targets. In its research, the moral rating agency said “Boeing’s subsidiaries, R&D facilities and joint ventures” were at risk of expropriation.

Following Russia’s invasion of Ukraine, Boeing suspended operations in Moscow, as well as parts and maintenance support for Russian airlines. The Seattle Times reports that Boeing’s design center in Moscow employs more than 1,000 engineers.

See now: Putin orders transfer of Sakhalin Energy to new Russian company, potentially repelling foreign partners

Boeing has not yet responded to a MarketWatch request for comment on the Moral Ratings Agency research.

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Post expires at 12:36pm on Thursday July 21st, 2022