It’s hard to break up with Russia. A Moscow court has delivered a blow to major Swiss banks UBS and Credit Suisse by prohibiting them from divesting their Russian subsidiaries, according to court documents cited by Reuters. The ban was requested by Moscow-based Zenit Bank, which expressed concerns about potential financial losses if the two Swiss banks were to exit their Russian operations. The issue stems from a syndicated loan provided to Luxembourg-based agricultural firm Intergrain in 2021, in which Zenit was a lender and Credit Suisse served as the credit agent. However, after Western sanctions were imposed on Russia following its invasion of Ukraine, Credit Suisse informed Zenit that it would not transfer loan repayments from Intergrain. Fearing abandonment, Zenit has taken its case to the Moscow court, seeking to prevent UBS and Credit Suisse from leaving its high-stakes market.
The ban on UBS and Credit Suisse is the latest in a series of measures taken by Moscow to restrict the exit of investors from Russia, particularly those from countries that have imposed sanctions on the nation. President Vladimir Putin signed a decree in April that grants the state the authority to seize the assets of companies or individuals from these “unfriendly” countries, as was done with Danish brewer Carlsberg and French food company Danone in July. Since Russia’s invasion of Ukraine, the country has experienced an exodus of Western companies, with over 1,000 companies announcing voluntary cutbacks in operations just two months after the conflict began in February 2022. However, only 530 companies have successfully severed ties with the Russian market as of August 14, as reported in an ongoing study led by Jeffrey Sonnenfeld, a professor at the Yale School of Management. As UBS and Credit Suisse face the possibility of being entangled in Russia’s regulatory web, the next court hearing is scheduled for September 14, leaving their future in the country uncertain.
Moscow Court Bans UBS and Credit Suisse from Disposing of Shares in Russian Subsidiaries
A Moscow court has issued a ban preventing UBS and Credit Suisse, two major Swiss banks, from disposing of shares in their Russian subsidiaries. The request for the ban came from Moscow-based Zenit Bank, which cited concerns about potential financial losses if the two banks were to exit their Russian businesses, according to Reuters.
The issue stems from a syndicated loan granted to Intergrain, a Luxembourg-based agricultural firm, in 2021. Zenit was one of the syndicated lenders, and Credit Suisse, which has since been acquired by UBS, acted as the credit agent for the loan. Although the loan amount is not specified, Zenit transferred $20 million to Intergrain in November 2021.
However, when Western sanctions were imposed on Russia due to its invasion of Ukraine, Credit Suisse informed Zenit that it would not transfer loan repayments from Intergrain. This led Zenit to believe that UBS and Credit Suisse were planning to exit their Russian businesses, which would leave Zenit in a vulnerable position.
Zenit also requested the court to seize funds belonging to UBS and Credit Suisse, but this application was not granted. The next court hearing is scheduled for September 14.
It’s worth noting that UBS declined to comment, while Credit Suisse and Zenit have not yet responded to requests for comment.
Moscow’s Restrictions on Exiting Russian Assets
The ban on UBS and Credit Suisse disposing of shares in their Russian subsidiaries is part of a broader trend in Russia. Moscow has prohibited investors from unfriendly countries, those that have imposed sanctions on Russia, from exiting their Russian assets without the approval of President Vladimir Putin.
In April, President Putin signed a decree allowing the state to take over the assets of companies or individuals from these countries. This was seen in action when Russian authorities seized the assets of Danish brewer Carlsberg and French food company Danone in July.
After Russia’s invasion of Ukraine, many Western companies chose to leave the Russian market. However, some have remained either voluntarily or due to challenges in exiting. According to a study led by Jeffrey Sonnenfeld, a professor at the Yale School of Management, while over 1,000 companies announced cutbacks in operations in Russia just two months after the start of the Ukraine war in February 2022, only 530 companies have successfully made a clean break as of August 14.
Overall, the ban on UBS and Credit Suisse from disposing of shares in their Russian subsidiaries highlights the challenges faced by Western companies operating in Russia. Moscow’s restrictions on exiting Russian assets and the seizure of assets from unfriendly countries demonstrate the increasing control exerted by the Russian government. The outcome of the court hearing on September 14 will be closely watched as it could have significant implications for the future of UBS and Credit Suisse in Russia.
Takeaways:
- A Moscow court has banned UBS and Credit Suisse from disposing of shares in their Russian subsidiaries, following a request from Zenit Bank.
- The ban is related to a syndicated loan granted to Intergrain, with Zenit being one of the lenders and Credit Suisse acting as the credit agent.
- Moscow has imposed restrictions on investors from unfriendly countries exiting their Russian assets without President Putin’s approval.
- Russian authorities have seized the assets of companies from countries that have imposed sanctions on Russia, including Carlsberg and Danone.
- Many Western companies have left the Russian market since the Ukraine war, but challenges remain for those attempting to make a clean break.
