Kremlin warns of more asset seizures after move against Fortum and Uniper

By Alexander Marrow, Gleb Stolyarov and Anne Kauranen

(Reuters) -The Kremlin said on Wednesday it could seize more Western assets in retaliation for foreign moves against Russian companies, after taking temporary control of assets belonging to two European state-owned utilities.

President Vladimir Putin late on Tuesday signed a decree placing the Russian assets of Finland’s Fortum and Germany’s Uniper, which both operate power plants in Russia, under Moscow’s control. Russia made clear that the move could be reversed.

Uniper said it was reviewing the action against its Russian division Unipro. Fortum said it was investigating and had learned from its Russian subsidiary that the company’s CEO had been replaced and the unit put under temporary asset management.

A spokesperson for Germany’s Finance Ministry, which oversees the government’s ownership of Uniper, said Berlin needed to assess the concrete implications of Russia’s decree.

Finland’s outgoing minister in charge of state holdings Tytti Tuppurainen tweeted that the information was worrying and that the state, as Fortum’s majority owner, would follow the matter closely.

Moscow has reacted angrily to reports that Group of Seven nations are considering a near-total ban on exports to Russia, while many have called for tougher sanctions to limit Russia’s ability to fight in Ukraine.

Meanwhile, the European Union is looking at using frozen Russian assets to rebuild Ukraine. Germany nationalised a former division of Russian energy giant Gazprom (MCX:) last year.

“The decree adopted is a response to the aggressive actions of unfriendly countries,” Kremlin spokesman Dmitry Peskov said. “This initiative mirrors the attitude of Western governments towards foreign assets of Russian companies.”

Putin’s decree “does not deal with property issues and does not deprive the owners of their assets. Because external management is temporary and only means that the original owner no longer has the right to make management decisions,” Peskov continued.

“The main purpose of the decree is to form a compensation fund for the possible application of reciprocal measures in response to the illegal expropriation of Russian assets abroad.”

LACK OF CLARITY

Uniper owns 83.73% of Unipro, which operates five power plants with a total capacity of over 11 gigawatts in Russia and about 4,300 employees.

Fortum’s Russia division has seven thermal power plants in the Ural region and Western Siberia, and a portfolio of wind and solar plants in Russia together with local venture partners. The book value of those assets was 1.7 billion euros ($1.87 billion) at the end of 2022.

Fortum is majority-owned by Finland, which joined the NATO military alliance early this month in a move Moscow called a dangerous mistake.

The Finnish foreign ministry would not immediately comment on how Russia’s decision might affect relations between the two countries.

“Fortum’s current understanding is that the new decree does not affect the title (registered ownership) of the assets and companies in Russia,” the company said in a statement.

“However, it remains unclear how this affects e.g. Fortum’s Russian operations or the ongoing divestment process,” it added.

Both companies have been trying to exit Russia. In February, Uniper valued its Unipro stake at a symbolic 1 euro to reflect the likelihood that a deal would not take place.

Peskov said external management was being introduced for assets of “paramount importance to the stable functioning of the Russian energy sector” and that the list could be expanded.

The two entities’ shares were placed in the temporary control of Rosimushchestvo, the federal government property agency.

New chief executives were installed, Vasily Nikonov at Unipro and Vyacheslav Kozhevnikov at Fortum in Russia, with both men moving from Russian oil companies at Rosimushchestvo’s behest.

State-owned Russian bank VTB this week said Russia should consider taking over and managing the assets of foreign companies such as Fortum, only returning them when sanctions were lifted. Fortum had previously flagged expropriation risk.

Asset sales by investors from “unfriendly” countries – as Moscow terms those that imposed sanctions against Russia – require approval from a government commission and, in some cases, the president.

Moscow’s move creates a new headache for companies trying to extricate themselves from Russia. Companies with stakes in energy projects and banks already face more stringent exit pathways.

Wintershall Dea, which still holds stakes in a number of Russian joint ventures with Gazprom, called Moscow’s policies “unpredictable” and “unreliable”.

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