After Seizing Western Assets, Russia Installs New Management

Russia has appointed Chechnya’s agriculture minister as the new head of Danone’s business in the country and tapped a Russian businessman to run Carlsberg’s operations there, cementing control of the Western multinationals’ Russian assets days after they were seized.

President Vladimir Putin on Sunday signed a decree that effectively placed the local operations of the French food company and Danish brewing giant under government management. Russia’s unexpected seizure of assets belonging to two of the world’s largest consumer-goods companies marked an escalation in economic hostilities with the West amid the war in Ukraine.

The appointment of Yakub Zakriev, who is also Chechnya’s deputy prime minister, as head of Danone’s Russian business was reported late Tuesday by state news agency TASS. A Russian company database also named Zakriev as head of the company. Zakriev is the nephew of Ramzan Kadyrov, the Chechen leader and an ally of Putin.

Meanwhile, Baltika Breweries, Carlsberg’s Russian business, confirmed the appointment of Taimuraz Bolloev as its new manager. Bolloev previously ran the company for more than a decade, having founded it in 1990. By the time he resigned in 2004, Baltika had become Russia’s leading brewer. Carlsberg then acquired it in 2008. 

Bolloev is also chairman of Russian clothing company BTK Group, a supplier of the Russian army, and a former head of the state company tasked with building facilities for the 2014 Winter Olympics held in the resort city of Sochi.

Carlsberg said Wednesday that it no longer retains control of Baltika’s management or operations. “The change to the management of Baltika Breweries has consequently been made without the knowledge or approval by Carlsberg Group,” the company said.

The recent moves highlight the risks to Western companies still operating in Russia, or looking to leave, as well as the shifts in corporate power in the country more than a year after Moscow invaded Ukraine.

Russia unveiled a decree in April that allows the state to take temporary control of assets of companies or individuals from what the Kremlin calls “unfriendly” states. Russian officials have said that the seizures were in retaliation for similar moves by Western countries and that more companies could be targeted.

At that time, Russia took control of utilities owned by Germany’s Uniper and Finland’s Fortum and appointed managers from oil giant Rosneft, headed by longtime Putin ally Igor Sechin,

Kadyrov, the Chechen leader, has publicly called himself Putin’s foot soldier and serves as a Kremlin enforcer in Chechnya, a restive republic in Russia’s North Caucasus. For two decades, Moscow has sent him billions of dollars, which he has used to rule his native region as a personal fief with his own highly trained private army. Kadyrov has also played a role in the Ukraine war and last month offered to help put down a later-abandoned mutiny by Wagner mercenary chief Yevgeny Prigozhin, which he called a “stab in the back.”

Zakriev’s appointment at Danone was hailed by senior Chechen official Akhmed Dudayev as an indication of the success of Kadyrov’s team. 

“At this point, Western businesses remaining in Russia do not have good options left,” said Andrius Tursa, Central and Eastern Europe adviser at Teneo, a consulting firm. “The window of exiting the market is closing, while the option of staying comes with major operational, regulatory and reputational risks.”

The April decree set up new hurdles for foreign companies trying to exit from the country, marking a step up in the economic battle that is taking place in parallel with the kinetic war being fought on the battlefields of Ukraine.

Many Western companies have struggled to wind up their operations in Russia and the latest asset seizures—and now management changes—serve as a warning shot to those still looking to exit.

In December, the Kremlin adopted rules requiring the Russian government to conduct an assessment of the market value of any asset for sale by a foreign company. The seller is then required to sell the asset at a 50% discount of that value. Additionally, Moscow is levying an exit tax of 10% of the transaction price as it tries to shore up its significant budget deficit, weighed by the costs of the war in Ukraine. 

Now, companies working to broker deals that would allow them to exit Russia appear to face the prospect of Moscow torpedoing their efforts at the last minute.

Carlsberg said in March last year that it planned to exit Russia. The Danish brewer was among the Western companies with the biggest exposure to Russia through Baltika, which has eight breweries and around 8,400 employees in the country, representing more than one in every five members of Carlsberg’s total global workforce.

Carlsberg last month said that it had struck a deal to sell its Russia business, adding that the process had been “very complicated.” At the time, it warned that the deal going through was subject to regulatory approval by the Russian government.

On Sunday, Carlsberg said it would assess the legal and operational consequences and take all necessary actions in response.

Danone, the largest dairy company in Russia, said in October last year that it had begun looking for ways to transfer control of its dairy and plant-based business in the country. On Sunday, the French company said it was investigating the situation and preparing to take all necessary steps to protect its rights as a shareholder of Danone Russia.

Write to Georgi Kantchev at [email protected], Mauro Orru at [email protected] and Saabira Chaudhuri at [email protected]