Russian prosecutors warn Western companies of arrest, confiscation of assets

The people said prosecutors last week warned companies including The Coca-Cola Co., McDonald’s Corp., Procter & Gamble Co., International Business Machines Corp. and KFC owner Yum Brands Inc. The calls, letters and visits included threats to sue the companies and seize assets, including trademarks, people said.

Russian President Vladimir Putin last week expressed support for a law to nationalize the assets of foreign companies leaving his country after the invasion of Ukraine. People familiar with the matter said prosecutors’ warnings were directed at companies from all sectors, including technology, food, apparel and banking.

Some said the warnings prompted at least one of the targeted companies to limit communication between its Russian business and the rest of the company, over concerns that emails or text messages between coworkers could be intercepted. , some people said.

Other companies have transferred officials from Russia to take over, others familiar with the matter said.

Spokespersons for Coca-Cola, IBM, P&G and McDonald’s declined to comment. A spokesman for Yum declined to comment beyond the restaurant company’s previous statements on its decision to halt operations at its KFC and Pizza Hut restaurants in Russia.

Late on Sunday, following the article’s online publication, the Russian embassy in Washington retweeted it, with the red “FAKE NEWS” label on it. “The decision to continue entrepreneurial activity in our country is entirely up to Americans,” it tweeted. “As well as the right to ignore the Russophobic hysteria that encourages foreign businesses to take heavy losses to hit @Russia.”

A parade of companies have announced plans to suspend or reduce their operations in Russia in the wake of Mr Putin’s invasion of Ukraine and sanctions imposed by Western governments.

Several companies, especially retailers and manufacturers, have said that their decisions to stop operations are temporary. Some said the disruption was needed because of restrictions on supply chains. Others have committed to leaving for good.

According to people familiar with the matter, the companies are evaluating their business in Russia in a different way, given the economic volatility and expectations that the situation will be volatile for some time. Despite warnings from prosecutors, many companies do not plan to change their decisions to scale back or suspend operations, the people said. One of the people said that if the government sought to implement its own managers, it would also be difficult for companies to move operations smoothly in Russia.

The Russian Prosecutor General’s office said on Friday it would ensure that companies it has said are halting or exiting operations comply with the country’s labor laws. According to the Yale School of Management, more than 350 foreign companies have said they are leaving or temporarily suspending work in Russia.

Wall Street banks such as Goldman Sachs Group Inc., consumer-goods companies such as Coke, retailers such as Levi Strauss & Co., and tech giants such as Apple Inc. have announced plans to pull back. Energy giants such as BP Plc and Exxon Mobil Corp said they would exit Russian operations.

Mr Putin backed a plan released last week by a senior member of his flagship United Russia party to nationalize the operations of Western companies leaving the country. Andrei Turchak, secretary of the General Council of the United Russia Party, said such a move would help prevent job losses and preserve Russia’s ability to produce goods domestically.

Washington warned against the nationalization attempt.

“Any lawless decision by Russia to confiscate the assets of these companies will ultimately result in even greater economic pain for Russia,” White House press secretary Jen Psaki tweeted on Thursday and could invite legal action.

Coca-Cola said last week that it would cease operations in Russia. Coke’s businesses in Russia and Ukraine contributed about 1% to 2% of its operating revenue and earnings in 2021. The company had an ownership interest of approximately 21% in Coca-Cola HBC AG, Coke’s bottling and distribution partner. December 31.

Restaurant owner Yum said last week that it was temporarily closing 70 of its company-owned KFC locations and signing a deal with Pizza Hut franchisees to halt business at 50 of its locations. The company said it was also suspending all investment and restaurant development in Russia.

The company is “focused on the safety of our people in the region and will continue to support our teams in Ukraine while Yum Brands can continue to make a positive impact in the region,” the spokesperson said.

IBM President and Chief Executive Arvind Krishna wrote in a blog post last week that the company had suspended all business in Russia. “The safety and security of IBMers and their families remains our top priority in all areas affected by this crisis,” he wrote.

McDonald’s said last week that it was temporarily closing about 850 of its restaurants in the country and would continue to pay 62,000 people employed in Russia. The company said it could not yet determine when it might reopen restaurants in Russia and would consider whether any additional steps might be needed.

McDonald’s said that closing the restaurant is expected to cost the company an estimated $50 million a month for payroll, leases, supply-chain and other costs.

P&G, which makes Pampers diapers and Crest toothpaste, said it would halt investment, advertising and promotional spending in Russia, while selling only products focusing on basic health, hygiene and personal care. P&G said Russia and Ukraine combined account for less than 2% of annual revenue. The company said it employs 2,500 people in Russia.