Volkswagen receives Kremlin approval to sell Russian assets

Russian authorities have approved the sale of Volkswagen’s local assets to Avilon, one of the country’s largest car dealers, in a cut-price deal that underlines the challenges western companies face when trying to exit Russia.

The value of the sale to Avilon, which is the main supplier of cars to the country’s security services, will not exceed €125mn, state news agency Interfax reported on Tuesday.

VW’s fixed assets in Russia, including buildings and equipment, were valued at Rbs111.3bn (€1.5bn) in 2022, according to company disclosures.

Last year, Russia introduced stringent criteria for western companies pulling out of the country following President Vladimir Putin’s decision to wage war on Ukraine. Measures include selling at a discount of at least 50 per cent and making a “voluntary donation” to Russia’s war chest.

Lawyers involved in recent corporate exits say meeting these criteria is necessary but not enough as the state foreign investment commission decides on each deal on a case-by-case basis, occasionally adding extra requirements. But in the west after more than a year since Russia’s invasion of Ukraine, the political pressure on western consumer groups is mounting to stop doing business in or with Russia.

The requirements may also change for local buyers. “We are thinking about forcing buyers to put 20 per cent stakes in formerly western-owned assets on the market,” central bank governor Elvira Nabiullina said on Tuesday.

VW confirmed that it was in the process of selling its shares in Volkswagen Group Rus, which includes its Kaluga plant that employs 4,000 people, to a “reputable Russian investor”.

The German company would not comment on the value of the transaction, nor whether it would be able to receive any of the proceeds due to sanctions. “We will inform you when the deal is officially closed,” it said.

However, the Russian decision on the deal includes a limit on Avilon’s purchases of European currency “by 50mn per day,” suggesting that at least some of the money could go to VW’s accounts.

VW’s exit from Russia was further complicated by lawsuits filed by its former partner Gaz Group, which led the Russian court to temporarily freeze much of the German company’s assets.

The German carmaker was also last month rocked by a scandal when Der Spiegel reported that Siegfried Wolf — who sits on the supervisory board of Porsche SE through which the Porsche-Piech family holds its controlling stake in VW — had written to Putin to offer to help him rebuild the Russian car industry. Wolf was formerly a board member of Gaz and had in the letter said he could work with them.

VW said it had “no knowledge whatsoever of the letter from Mr Siegfried Wolf [ . . . ] and its irritating content”, adding that executives had not made any promises to Wolf or other parties that had been interested in buying its Russian business.

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