Russian authorities have agreed to sell Volkswagen’s domestic assets to Avilon, one of the country’s largest car dealers, in a cut-price deal that underscores the challenges Western companies face when trying to get out of Russia.
The official Interfax news agency reported on Tuesday that the value of the sale to Avilon, which is the main supplier of cars to the country’s security services, will not exceed 125 million euros.
Volkswagen’s fixed assets in Russia, including buildings and equipment, were valued at 111.3 billion rupees (€1.5 billion) in 2022, according to company disclosures.
Last year, Russia introduced strict criteria for Western companies withdrawing from the country following President Vladimir Putin’s decision to go to war with Ukraine. The measures include selling at a discount of at least 50 percent and making a “voluntary donation” to Russia’s war fund.
Attorneys involved in recent corporate exits say meeting those criteria is necessary but not sufficient as the government’s Committee on Foreign Investment decides on each deal on a case-by-case basis, sometimes adding additional requirements. But in the West, more than a year after the Russian invasion of Ukraine, political pressure is growing on Western consumer groups to stop doing business in or with Russia.
Requirements may also change for local buyers. “We are thinking of forcing buyers to put 20 percent of their shares in formerly Western-owned assets on the market,” central bank governor Elvira Nabiullina said on Tuesday.
Volkswagen has confirmed that it is in the process of selling its shares in Volkswagen Russ Group, which includes the Kaluga plant that employs 4,000 people, to a “reputable Russian investor”.
The German company would not comment on the value of the deal, nor whether it will be able to receive any of the proceeds due to the sanctions. “We will inform you when the deal is officially closed,” she said.
However, the Russian decision on the deal includes a limit on Avilon’s purchases of Eurocurrency “in the amount of 50 million per day”, which suggests that at least some of the money could go into VW accounts.
Volkswagen’s exit from Russia was further complicated by lawsuits brought by its former partner Gaz Group, which led the Russian court to temporarily freeze most of the German company’s assets.
The German carmaker was embroiled in a scandal last month when Der Spiegel reported that Siegfried Wolf — who sits on the supervisory board of Porsche SE and through which the Porsche-Pisch family holds its controlling stake in Volkswagen — had written to Putin to offer help. He rebuilt the Russian auto industry. Wolf was previously on the board of a gas company and said in the letter he could work with them.
Volkswagen said it had “absolutely no knowledge of the letter from Mr. Siegfried Wolf (..) and its disturbing content,” adding that the executives had made no promises to Wolf or other parties that were interested in buying its business in Russia.
