How foreigners are disposing of their Russian assets

After war broke out, there was a stampede of Western companies out of Russia. But, in early March, the government slowed that process: all transactions between Russian companies and citizens or businesses in countries designated as “unfriendly” must now be approved by a special commission. The Bell looked at how foreigners are disposing of Russian assets.

• The new commission is predictably hostile towards investors from “unfriendly” countries. For example, Canada’s Kinross Gold wanted to sell its Russian assets to Russia’s Highland Gold Mining. Before the commission got involved, the deal was estimated at $680 million; afterwards, it was $340 million. According to Finance Minister Anton Siluanov, the logic is simple: if Western investors want to leave Russia, let them pay. Moreover, in some cases, companies are unable to sell up due to restrictions. This is why, for example, Germany’s Uniper is unable to withdraw its capital from the Unipro energy company. Finland’s Fortum, similarly, cannot withdraw from TGK-1, the leading provider of electricity and heating to north-western Russia.
• In some industries, such as pharmaceuticals, children's food and agriculture, foreign companies cannot easily close their businesses for ethical reasons. But the bigger and better known the business, the harder it is to remain in Russia in the face of increasing political pressure. The second most common reason for leaving is the objective difficulty of continuing to do business in an era of bans on foreign trade operations, volatile exchange rates and logistical problems.
• In the first months of the war, some businesses were sold for a symbolic one dollar or one euro. But these transactions also involve the transfer of debts — and there are risks if the Russian economy continues to suffer. “The discount that many are now trying to measure is ultimately a reflection of the current risks in the Russian economy,” said Yaroslav Kabakov, strategic director at investment firm Finam.
• There is also fierce competition among Russian buyers. Some investors see the current situation as a chance to obtain a quality asset at knock-down prices and compare the current situation with the 1990s.
• Another popular option is to transfer businesses to the current management with a buy-back clause. Investment company Aspiring Capital estimates this has been the structure of about 32% of foreign asset transactions since the start of the war.

Why the world should care

Russia is currently in an uncharted business environment. While foreigners cannot always dispose of their Russian assets, some Russian investors are buying up shares despite the risks and difficulties.

Russia’s war in Ukraine has given rise to an influential new media segment with an audience of millions – Telegram channels specializing in war reporting.

With more than a million followers, Rybar is one of the most popular such channels, but – until now – its authors have remained anonymous. We wanted to put that right.

Rybar is a rare example of a channel about the war that does not adopt a clear position. It criticized the Russian Defense Ministry, but defended General Alexander Lapin when he was attacked by Russia’s pro-war elite.

Rybar also plays a part in the war. From the start of Russia’s invasion of Ukraine, the channel has published the locations of Ukraine’s forces and strategic sites. Sometimes, the channel boasts that the Russian army is using this information.

We found at least two people who run the channel. Interestingly, they are united by a love of fantasy novels. They are Denis Shchukin, a 44-year-old programmer from Moscow and Mikhail Zvinchuk, 31, a military translator of Arabic and ex-Defense Ministry press officer.

The project started as a hobby, but later its creators began to monetize it. Sources told The Bell that Wagner Group chief Yevgeny Prigozhin offered to finance the channel and wanted to use its expertise for his projects in Syria. This did not work out.

Since war broke out, Rybar has landed some big advertising deals. That drew the attention of the intelligence services. While continuing its work, the channel is now obliged to publish material on behalf of the FSB, one source told The Bell.