Russian President Vladimir Putin has issued decrees stripping multi-billion-dollar stakes in gas extraction projects in Russia’s Arctic from international firms Wintershall Dea and OMV. The move, confirmed by decrees published late on Tuesday, mandates the transfer of stakes held by these companies in the Yuzhno-Russkoye field and Achimov projects to newly established Russian entities.
Reactions and Economic Implications
Upon inquiry, a Wintershall spokesperson expressed concern, highlighting this as further evidence of Russia’s unreliability as an economic partner. Similarly, OMV stated it was reviewing the decree and might take steps to protect its rights.
Kremlin spokesperson Dmitry Peskov, however, clarified that the decrees didn’t signify asset confiscation but rather signaled the departure of companies from the market, potentially through negotiations or asset transfer.
Background and International Response
Vladimir Putin’s decision follows what he portrays as Western economic aggression in response to Russia’s military actions in Ukraine in February 2022. The West has frozen Russian state assets and those of Russian individuals and businesses, causing significant economic tension.
Additionally, significant Western assets in Russia, such as Carlsberg’s breweries and Danone’s enterprises, have fallen under Russian control. Germany’s takeover of a major Russian-owned oil refinery further exemplifies this trend.
Asset Transfer Details and Corporate Impact
The decrees outline a transfer of Achimov project stakes to newly formed limited liability companies and their subsequent evaluation and sale to Gazovyye Tekhnologii. OMV’s assets are to be sold to SOGAZ, an insurer for Gazprom, with proceeds held in special accounts belonging to the former foreign owners.
All prior corporate agreements are deemed invalid under these decrees, impacting Wintershall Dea, a joint venture between BASF and Russian billionaire Mikhail Fridman’s firm LetterOne, leading to financial deconsolidation of assets like Siberian gas fields.
Business Reactions and Financial Ramifications
BASF, learning of the situation from the news, is assessing the development. The company previously reported substantial losses due to Wintershall Dea’s deconsolidation in Russia, contributing to a net loss in 2022.
Wintershall Dea’s CEO ruled out selling assets to Fridman due to Western sanctions against him. The company is exploring avenues to recoup damages, including legal recourse.
Future Separation and Project Locations
All joint ventures involving Russian participation, including Wintershall Dea’s stake in the Nord Stream pipeline, will be legally detached by mid-2024. The Yuzhno-Russkoye field and Achimov projects, situated in Russia’s far north in the Yamal-Nenets region, face this separation.
Vladimir Putin’s decrees formalize a loss of control signaled by BASF and Wintershall Dea earlier in 2023. The move is framed as safeguarding national interests amid what Russia perceives as hostile actions by the West towards its assets.