By Anastasia Lyrchikova, Olga Popova, Gleb Stolyarov and Darya Korsunskaya

MOSCOW (Reuters) – Russia is quickening the pace of domestic asset seizures this year after courts ruled last week that a leading grain trader, Moscow’s sprawling Domodedovo airport, and strategic warehouse assets be handed over to the state.

Foreign companies have grappled with the risk of state seizure ever since Russia sent troops into Ukraine in February 2022. However, under the auspices of strategic stability and domestic security, Moscow has increasingly targeted domestic assets as well.

Grains trading house Rodnie Polya, Moscow’s Domodedovo Airport, and all 16 warehouses belonging to Russia’s largest warehouse owner Raven (NASDAQ:RAVN) were all placed under state management on January 31, according to court documents and sources.

The General Prosecutor’s office did not respond to Reuters’ requests for comment on the cases.

Lawyers consulted by Reuters indicated that the number of cases filed due to foreign ownership would likely increase in strategic sectors of the economy. They noted that the rules of engagement were changing for any businesses with non-Russian links.

> “This is a signal to owners with dual citizenship, especially from unfriendly countries,” said Artem Zhavoronkov, a partner at the Russian law firm Nordic Star. “Either renounce your foreign citizenship or lose your business in Russia.”

The Kremlin refers to countries that have imposed sanctions on Russia over its actions in Ukraine as “unfriendly.”

Rodnie Polya controlled 14% of Russia’s grain exports just a year ago but has steadily lost market share.

Owner Petr Khodykin surrendered his St Kitts and Nevis passport and a UAE residency permit this week in a last-ditch attempt to retain his business, according to a source close to the company.

However, this attempt may have been in vain. Rodnie Polya’s assets were handed over to Rosimushchestvo, Russia’s federal property management agency, on February 5, based on Russian tax filings.

Rodnie Polya stated that its legal team was exploring various defense methods, including appealing to the constitutional court.

> “Petr Khodykin is looking for a fair trial for a Russian citizen and is trying to draw the authorities’ attention to his case, which is different from instances where the General Prosecutor protects state interests,” Rodnie Polya said.

WIDESPREAD ASSET SEIZURE

More than 1 trillion roubles ($10.34 billion) worth of strategic enterprises and assets — deemed critical for developing Russia’s economy and defense capabilities — have been transferred to state ownership through Russian courts in 2023, according to Prosecutor General Igor Krasnov in March 2024.

While several foreign-owned assets, such as those of Danone (EPA:DANO) and Carlsberg (CSE:CARLb), were seized by presidential decree before being sold to chosen buyers, the General Prosecutor has resorted to court actions.

Last April, Russian President Vladimir Putin stated that assets would only be seized when Russia’s national security was at stake. However, authorities have continually adjusted their approaches to asset seizure.

> “When a method proves effective, it quickly becomes widely adopted,” remarked an individual whose business was taken over by the state, indicating that government agencies are keen to showcase their successes in bringing assets into the state portfolio.

Any company with strategically important assets to Russia or failing to reinvest in its businesses in the country could be at risk, as per a presentation prepared by a law firm advising clients.

On February 5, prosecutors filed a similar case against oil services company Borets, with its ultimate holding company registered in the UAE.

Borets did not respond to a request for comment immediately.

‘NEW RULES OF THE GAME’

A Russian agriculture source dismissed concerns, viewing the seizure of Rodnie Polya as an isolated incident unlikely to threaten other agricultural firms.

Boris Brusko, managing partner at law firm I. Helory, stated that the Rodnie Polya case indicates the state’s intention to enhance control over corporate activities of assets it deems strategic.

> “This signifies the establishment of new rules of the game for protecting state strategic interests in the current political climate,” Brusko told Reuters.

Another agricultural source noted the rapid pace of court proceedings, which surprised many, with legal representatives given little time to familiarize themselves with case files.

The hastiness of decisions was an unpleasant surprise, said economist Yevgeny Nadorshin at PF Capital, suggesting fiscal pressure could be driving the urgency as economic growth slows and new U.S. sanctions may impact Russia’s revenues.

The principle of loyalty remains significant, he added, as “the wrong passport raises suspicion of undesirable foreign influence.”

“Based on the developments at the beginning of the year, this process seems to have intensified,” Nadorshin remarked. “I feel uncomfortable implying this is the final stage of asset seizures.”

($1 = 96.7455 roubles)