7 of Japan Tobacco Inc.'s (JT) Russian subsidiaries have been placed under the temporary administration of Russian companies, highlighting the growing possibility of their assets being seized. The company continues to face a difficult decision over whether to exit or remain in Russia.
7 of Japan Tobacco Inc.'s (JT) Russian subsidiaries have been placed under the temporary administration of Russian companies, rekindling the risks of its Russian operations. Since Russia's invasion of Ukraine in 2022, JT had continued to monitor developments while scaling back its business, among other measures. With the possibility of its assets being seized growing, it now faces a difficult decision over how to proceed in the Russian market.
Russia introduced measures in April 2023 to place the assets of companies from unfriendly countries under temporary administration, and the action involving JT is based on these measures. The local subsidiaries will remain able to generate operating revenue, but because effective control of their management will be taken away, they are expected to face difficulty remitting funds outside Russia.
When an unfriendly-country company sells its Russian subsidiary to a Russian company, the sale must be made for no more than 40% of market value, and 35% of market value must simultaneously be paid to the Russian government. JT has changed or canceled part of its schedule, including canceling a briefing for individual investors that had been scheduled for the 26th because of changes in the business environment.
Meanwhile, 65 Japanese companies are said to continue operating in Russia. Although the wave of exits has subsided, the latest development once again raises questions about how Japanese companies will respond in the Russian market.