President Vladimir Putin signed a decree that transferred the shares of foreign shareholders to the “temporary control” of Rosimushchestvo, the agency responsible for state property. The decree affects the Baltika brewery, which is 100% owned by Denmark’s Carlsberg, and dairy firm Danone Rossiya, which is owned by France's Danone. In effect, the state has appropriated the assets of foreign investors who have poured billions of dollars into the Russian eonomy over the years.
Danone Rossiya and Baltika are important players on the Russian consumer market. Danone is Russia’s biggest diary producer and Baltika is the second-largest brewery.
Danone first started producing its branded products in Russian factories in 1994, and opened its own plant in the country in 2000. By 2022, the French company owned 13 businesses in the country, employing 100,000 staff.
Carlsberg became a key player in the Russian beer market in 2000 when it partnered with Norway’s Orka to acquire a 50% stake in Baltika. In 2008 the Danes increased their share in Baltika to 100%. From 1996 to 2020, Baltika was consistently the leading beer brand in Russia.
The decree might come as a surprise to Carlsberg: three weeks ago the company announced that it found a buyer for its Russian assets (although the buyer’s identity was never publicized). However, it’s currently impossible to sell Russian subsidiaries of foreign companies without the permission of a special government commission. Carlsberg’s press service admitted that it was awaiting that permit.
In February 2023, media reports said Danone planned to transfer control over its assets to new investors. However, there were never any reports that new investors had been found.
“Transfer to temporary control” is de facto nationalization. This mechanism was introduced at the end of April and was first applied to two major foreign investors in the Russian electricity market: Germany’s Uniper and Finland’s Fortum. The day after Putin’s decree was published, the management of both companies’ Russian subsidiaries were replaced with individuals from Rosneft boss Igor Sechin’s circle. This week Fortum announced that it was filing a multi-billion-euro compensation claim to international arbitration.
Why the world should care
In reality, nationalization happened some time ago, and it fell upon everyone at once. Last fall, Putin banned foreign companies from selling Russian assets without the government’s permission. If you cannot sell your business when you choose, it is no longer your business.