Russian President Vladimir Putin has signed decrees granting his government power to confiscate and forcibly sell off billions of dollars worth of assets belonging to European energy firms to new state-approved owners.
In a decree published Wednesday, the Kremlin mandated the creation of new Russian-run companies to take over shares in the colossal Yuzhno-Russkoye oil and gas field, currently owned by Austria’s OMV and Germany’s Wintershall. The two European energy giants, both from countries that Moscow claims are “unfriendly” in the wake of its full-scale invasion of Ukraine, together hold a 60 percent stake in the drilling site in Russia’s icy far north.
While the companies will theoretically be compensated for their investment, the amount they receive from the sale will be determined by the Russian state, in a move that marks the biggest asset seizure in the country’s recent history.
Earlier this year, the Kremlin laid out a legal framework for the expropriation of foreign-owned assets as it seeks to shore up its economy in the face of Western sanctions. Following the decision, former Russian oil and gas tycoon Mikhail Khodorkovsky, who had his own energy empire dismantled and was jailed as a result of his opposition to Putin, told POLITICO there were now no legal protections for foreign firms.
“There are no guarantees for the safety of investments anywhere, but Vladimir Putin’s regime has demonstratively built an illegitimate and lawless state,” he said at the time.
Many Western energy firms have announced their total withdrawal from Russia since the start of the war in February 2022, including the U.S.’s Exxon Mobil and Norway’s Equinor. However, others such as Shell, BP, TotalEnergies and Wintershall have found the practicalities of wrapping up their business in the country and clawing back their funds challenging.
Experts warn that a lack of Western investment, coupled with embargoes on key hardware and technologies for oil and gas exploration and drilling, mean Russia’s flagship fossil fuels sector is likely to face a long-term decline in productivity, despite sanctions loopholes and high prices for oil and gas.
Meanwhile, the Kremlin has already confiscated assets belonging to Western firms like Danone and Carlsberg in the wake of their decisions to leave the market, handing the windfall to close allies of Putin and their families.
