In a recent decree, Kremlin leader Putin has placed the assets of a global metal packaging manufacturer under temporary state administration, which is widely seen as a prelude to expropriation. The Austrian company Silgan, which has served as the European headquarters for the group since 2011, is a subsidiary of the American company Silgan Holdings.
In its ongoing conflict with the West, Russia has targeted another Western company. Specifically, it has seized the Russian assets of the Austrian companies Silgan Holdings Austria GmbH and Silgan Metal Packaging Mitterdorf GmbH. A decree issued by Kremlin leader Vladimir Putin on July 11th placed the Russian subsidiaries under immediate temporary state administration. This move is generally considered the first step towards complete expropriation.
Since 2011, the Austrian company Silgan Holdings has been part of the US-listed Silgan Holdings. It functions as the group’s European headquarters and is recognized as a leading global manufacturer of metal packaging.
The Russian decree issued on Thursday mandates that 100 percent of the shares in the companies Silgan Metal Packaging Stupino (located in the Moscow region) and Silgan Metal Packaging NM (located in Adygea) will now be under the control of the Federal Agency for Asset Management (Rosimuschestvo).
According to a Russian news agency, citing the financial statements of both Russian subsidiaries, the companies have experienced a decline in business in recent years. Total sales dropped from 4.3 billion rubles in 2021 to 3.6 billion rubles in 2022, the first year of the Ukraine war. Additionally, the Silgan companies based in Russia were largely inactive in 2023.
Russia Takes Control of Silgan Metal Packaging Assets
Kremlin Places Russian Subsidiaries Under Temporary State Administration
In a move that signals a growing trend of Russia targeting Western businesses, the Kremlin has placed the assets of Silgan Holdings Austria GmbH and Silgan Metal Packaging Mitterdorf GmbH under temporary state administration. This decision, issued through a decree by President Vladimir Putin on July 11, effectively marks the first step towards the potential expropriation of these companies.
Silgan Holdings Austria GmbH, headquartered in Austria, serves as the European hub for the global metal packaging giant, Silgan Holdings. Since 2011, the Austrian entity has been a subsidiary of the US-listed Silgan Holdings – a company renowned as a global leader in the metal packaging industry.
Key Takeaways
- Russia has placed the Russian subsidiaries of Silgan Holdings Austria GmbH and Silgan Metal Packaging Mitterdorf GmbH under temporary state administration.
- This is widely viewed as a prelude to potential expropriation, mirroring other actions taken once morest Western companies.
- The decree mandates that 100% of the shares in Silgan Metal Packaging Stupino (Moscow region) and Silgan Metal Packaging NM (Adygea) will now fall under the control of the Federal Agency for Asset Management (Rosimuschestvo).
- Recent years have seen a decline in business for the Russian subsidiaries, with total sales shrinking from 4.3 billion rubles in 2021 to 3.6 billion rubles in 2022, coinciding with the commencement of the Ukraine war.
- In 2023, the Silgan companies based in Russia have been largely inactive.
Potential Implications
This move marks an escalation in Russia’s efforts to exert control over Western businesses operating within its borders. It underscores the challenging and uncertain environment faced by foreign companies seeking to maintain operations in Russia, particularly amidst the ongoing geopolitical tensions.
The implications of this action extend beyond Silgan, potentially serving as a deterrent to future investments in Russia and raising concerns regarding the security of existing assets. The move also raises questions regarding Russia’s commitment to upholding international agreements and the principles of private property rights.
Silgan’s Response
Silgan Holdings has not yet publicly commented on the Russian government’s actions. However, given the nature and potential implications of the decree, it is highly likely that the company is currently evaluating its options and exploring potential strategies to mitigate the impact on its business.
The Future of Silgan in Russia
The future of Silgan’s Russian operations remains uncertain. While the decree signifies a major shift in the company’s position in Russia, the timeline and ultimate outcome of the situation remain unclear. The extent to which the Russian government will pursue the potential expropriation of Silgan’s assets will be closely watched.
Implications for Foreign Companies
The case of Silgan serves as a potent reminder for foreign companies operating in Russia regarding the complexities and risks associated with conducting business in a politically charged environment. The situation underscores the importance of:
- Diversifying investments to mitigate exposure to single markets
- Maintaining a strong understanding of local regulations and political developments
- Implementing comprehensive risk management strategies to navigate potential challenges
The Silgan situation also highlights the need for international organizations and governments to exert pressure on Russia to uphold its obligations regarding private property rights and the sanctity of international agreements.