The Russian state has taken control of French yogurt maker Danone’s (DANO.PA) Russian subsidiary along with beer company Carlsberg’s (CARLb.CO) stake in a local brewer, according to a decree signed by President Vladimir Putin on Sunday. The decree said that foreign-owned stakes in Danone Russia and Baltika Breweries were being put under the “temporary management” of government property agency Rosimushchestvo. It comes after the Russian subsidiaries of Germany’s Uniper and Finland’s Fortum were seized in April, as Moscow warned it could seize more Western assets temporarily in retaliation for moves against Russia abroad.
The Kremlin’s move highlights the risks facing companies that continue to operate in Russia after it wreaked havoc in Ukraine and provoked a series of sanctions by the West. The move will likely send a strong signal to other foreign companies considering withdrawing from Russia, particularly those with significant pension funds invested in the country.
Several major European energy firms have already pulled out of the country since Russia invaded Ukraine on February 24. Danone has been in talks to sell its operations in Russia and last month said it had found a buyer for the business. However, the company said that if it does withdraw entirely from the Russian market, it could have to write down its investment by around EUR 1 billion.
In a statement, Danone said the decision would not directly impact its financial guidance for 2023. The French food group says it is taking steps to protect its rights as a shareholder of Danone Russia and will continue to ensure the continuity of its business there in the best interests of all stakeholders, particularly employees.
Carlsberg also issued a statement, saying that it had yet to receive any official information from the authorities on the presidential decree or its consequences for its local brewery, Baltika Breweries. The brewer also said it had started the process of selling its business in Russia but that this was subject to regulatory approval and completion.
Shares in both Danone and Carlsberg fell sharply after announcing the takeover news. Carlsberg shares were down almost 6%, while Danone shares lost 1.1%.
The French government’s reassurances on the situation in Russia come days after French President Emmanuel Macron promised to send more hard-hitting Scalp missiles to Ukraine, which is still battling Russian forces as they attempt to seize control part of its territory. The announcement has raised concerns about possible economic retaliation from the Kremlin and France’s ability to defend its ally in the conflict. However, some analysts say that the Russian move against Danone and Carlsberg is unlikely to significantly impact the broader economy, given that most companies affected are small to medium-sized enterprises. They add that larger, more sophisticated businesses would be more likely to leave if the tensions escalated significantly. Nevertheless, investors are jittery about the future of Russia’s relationship with the global markets.