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By John O'Donnell
(Reuters) - Russia is advancing a new law allowing it to take control of the local businesses of western companies that decide to leave in the wake of Moscow’s invasion of Ukraine, raising the stakes for multinationals trying to exit.
The law, which could be in place within weeks, will give Russia sweeping powers to intervene where there is a threat to local jobs or industry, making it more difficult for western companies to disentangle themselves quickly unless they are prepared to take a big financial hit.
The law to seize the property of foreign investors follows an exodus of western companies, such as Starbucks, McDonald's and brewer AB InBev, and increases pressure on those still there.
It comes as the Russian economy, increasingly cut-off due to western sanctions, plunges into recession amid double-digit inflation.
Italian lender UniCredit, Austrian bank Raiffeisen, the world's biggest furniture brand, IKEA, fast food chain Burger King, and hundreds of smaller firms still have businesses in Russia. Any that try to leave face this tougher line.
IKEA, which has paused all operations in Russia, said it was closely following the development. Raiffeisen, said it was assessing all options, including a carefully managed exit. UniCredit declined to comment while Burger King did not immediately respond to a request for comment.
The bill paves the way for Russia to appoint administrators over companies owned by foreigners in "unfriendly" countries, who want to quit Russia as the conflict with Ukraine drags down its economy.
Moscow typically refers to countries as "unfriendly" if they have imposed economic sanctions on Russia, meaning any firms in the European Union or United States are at risk.
The European Commission proposed toughening its own stance on Wednesday to make breaking EU sanctions against Russia a crime, allowing EU governments to confiscate assets of companies and individuals that evade restrictions against Moscow.
Meanwhile, in a move that could push Moscow closer to the brink of default, the Biden administration announced it would not extend a waiver that enabled Russia to pay U.S. bondholders.
ECONOMIC PAIN
The departures of western firms have angered Russian politicians. Former president Dmitry Medvedev, who is now deputy chairman of Russia's Security Council, has been a particularly vocal critic of western companies who left, attacking "enemies who are now trying to limit our development and ruin our lives".
"The government is interested in preserving jobs and tax revenues," said Sergej Suchanow, a lawyer with risk management and compliance consultancy RSP International.