We learned recently that the Kremlin has signed a secret order that will allow officials to seize the assets of “naughty” Western companies at cut price rates and is considering fully nationalising some of them as well.
The remaining European and American companies that stayed on in Russia after the war – such as the tobacco manufacturer Philip Morris, Unilever, or the brewer Heineken – may soon be in for a huge shock.
Their assets may be vulnerable to being taken into state control, or shared out among the same group of cronies that have always been the core beneficiaries of Putin’s gangster state.
In this scenario, factories, warehouses and distribution networks would all be completely lost. And, as if that were not bad enough, those businesses that escape expropriation face potentially huge tax rises as the government also starts planning a raid on the corporate sector.
There has never been a worse time to be trying to do business with Russia.
In its desperation, the Kremlin may think this is the smart thing to do. It may well be the only option it has left to finance an increasingly expensive war.
But there are two long-term problems. The first is that it renders the country uninvestable for any foreign company. Expropriation has only ever been attempted by the most desperate regimes, and typically has catastrophic consequences.
President Mugabe expropriated farmland and mines in Zimbabwe, and destroyed what little remained of what was once one of Africa’s most prosperous economies.
In the 1930s, Mexico was a leading oil producer, but after the major oil company assets were seized it was frozen out of global markets, exports halved, and Nazi Germany ended up as its only major customer.
The story always plays out in the same way, and it is always the country that seizes private property that comes off worse.
Even worse, Russia will lose what little access to the rest of the global economy it still has.
Cut off from the rest of the world, and starved of foreign investment, it won’t be able to mobilise either the money or the expertise it will need to rebuild itself even after the war is over.
It is a sorry end for a country that once promised so much.
Russia’s transformation into a wholly-owned subsidiary of China is now complete
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We learned recently that the Kremlin has signed a secret order that will allow officials to seize the assets of “naughty” Western companies at cut price rates and is considering fully nationalising some of them as well.
The remaining European and American companies that stayed on in Russia after the war – such as the tobacco manufacturer Philip Morris, Unilever, or the brewer Heineken – may soon be in for a huge shock.
Their assets may be vulnerable to being taken into state control, or shared out among the same group of cronies that have always been the core beneficiaries of Putin’s gangster state.
In this scenario, factories, warehouses and distribution networks would all be completely lost. And, as if that were not bad enough, those businesses that escape expropriation face potentially huge tax rises as the government also starts planning a raid on the corporate sector.
There has never been a worse time to be trying to do business with Russia.
In its desperation, the Kremlin may think this is the smart thing to do. It may well be the only option it has left to finance an increasingly expensive war.
But there are two long-term problems. The first is that it renders the country uninvestable for any foreign company. Expropriation has only ever been attempted by the most desperate regimes, and typically has catastrophic consequences.
President Mugabe expropriated farmland and mines in Zimbabwe, and destroyed what little remained of what was once one of Africa’s most prosperous economies.
In the 1930s, Mexico was a leading oil producer, but after the major oil company assets were seized it was frozen out of global markets, exports halved, and Nazi Germany ended up as its only major customer.
The story always plays out in the same way, and it is always the country that seizes private property that comes off worse.
Even worse, Russia will lose what little access to the rest of the global economy it still has.
Cut off from the rest of the world, and starved of foreign investment, it won’t be able to mobilise either the money or the expertise it will need to rebuild itself even after the war is over.
It is a sorry end for a country that once promised so much.
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