Putin Critic Warns Kremlin Will Seize More Assets to Punish Foes

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(Bloomberg) — Sergei Petrov couldn't do anything from his home on the outskirts of Vienna as Russian President Vladimir Putin moved to seize the car dealership he founded and built.

Putin signed a decree last December transferring ownership of Rolf, the largest car dealership in Russia, from an entity registered in Cyprus controlled by the Petrov family to the state real estate agency Rosimochstvo for temporary management. Shortly after, armed officers raided the company's headquarters to ensure that the appointment of the new board of directors went smoothly, according to Petrov.

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“It is a kleptocratic government,” Petrov said in an interview at his home in Austria, where he has resided permanently since 2016. “There are no laws, only selective application of justice.”

During Putin's two-and-a-half-decade rule, Russia has sought to build up state-owned enterprises and at times used the criminal justice system to hand over assets to Kremlin allies. This accelerated after Russia's invasion of Ukraine, which severed relations with the West and increased pressure on private companies to openly support the war.

The Petrov family owned Rolf through Delance Ltd, which was subject to laws allowing Putin to seize the assets of some foreign companies because Russia classifies Cyprus as an unfriendly country. Russian lawmakers have not yet ratified a treaty on mutual investment guarantees with Cyprus, hampering efforts to find a legal remedy. Russia nationalized Rolf in February.

Petrov, a dual Russian-Austrian citizen, said his situation reflects a new normal in Russia, where Putin feels increasingly comfortable using the judicial system to interfere in businesses and reward loyalists. He said the harassment by prosecutors was politically motivated, and because of his criticism of the Russian leader's actions, such as when, while serving as a lawmaker in the Russian parliament, he did not participate in the 2014 vote to annex Crimea. In 2011-2012, he also publicly supported the largest anti-government protests during Putin's rule.

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The Russian authorities opened a criminal investigation against him in 2019, accusing him of illegally transferring money abroad. Petrov says the allegations are based on vague regulations, and the courts ignored significant procedural shortcomings when they sentenced one of his managers, one of the defendants in the case, to more than eight years in prison.

The Kremlin did not respond to Bloomberg's request for comment. Rolfe's representatives also did not respond when asked for comment.

The Austrian government rejected an extradition request against Petrov, but a 2022 Russian civil ruling referring to the criminal case forced Rolf to transfer 20 billion rubles ($214 million) to the Russian government.

While an appeal has been lodged against the decision in Russia, Petrov said it was unlikely to succeed, and he hoped to obtain compensation by following the scheme of the now-defunct Yukos Oil Company, which was previously Russia's largest oil and gas company. Two decades of legal battles resulted in former shareholders receiving $50 billion in compensation over allegations that Russia was politically motivated when it imposed several tax demands on Yukos Oil, which ultimately led to its bankruptcy. Russia said it would not pay

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His lawyers have filed a case before the UN Human Rights Committee based on the International Covenant on Civil and Political Rights, a treaty from which Russia has not yet withdrawn. They are also evaluating arbitration options. Read more: Rush in asset seizure cases puts Putin's tycoons on high alert

An agreement with prosecutors is unlikely, as in the case of sanctioned billionaire Andrei Melnichenko, who was allowed to keep some energy assets after his company agreed to contribute to financing charitable projects, according to Petrov.

Petrov said the company is currently working with government supervisors who are pressuring managers to stay with the company. Already reeling from the sanctions-induced shift from selling Western cars like Porsche and Mercedes-Benz to offering Chinese brands and used cars, he worries things will take a turn for the worse for Rolf.

Petrov said Omar Kremlev, president of the International Boxing Federation and its Russian national organisation, was introduced to the company as its future owner. Under Kremlev, the AIBA was stripped of the right to run the Olympic boxing tournaments in Tokyo in 2021 and Paris in 2024 due to concerns about the group's management and accusations that its Russian president used violent and threatening language about Olympic committee staff, according to the AIBA. News agency.

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Russia has become increasingly aggressive in seizing assets from local business tycoons since the beginning of the Ukrainian war. Prosecutors have filed at least 55 cases seeking asset nationalization since Moscow's invasion of Ukraine began two years ago, according to research published by Moscow newspaper RBC in December. Petrov said such transfers sometimes occurred in violation of laws requiring an auction to get rid of state-owned companies. Read more: Russian businessmen look to China to save devastated auto industry

The Russian unit of Danone Food Group is under a similar interim management system. The Financial Times reported in February that a dairy company owned by a member of the management team linked to Putin loyalist and Chechen leader Ramzan Kadyrov was set to buy the asset.

Other production plants have moved under government supervision, including units of Carlsberg A/S and US-owned AgroTerra. In the auto industry, a company linked to Rolf's rival Avelon bought plants abandoned by Volkswagen AG and Hyundai Motor.

“They tried to buy in the cheapest way in the hope that they would find a way to make money from it,” Petrov said of buying the factory. “It's speculation.”

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