Volkswagen Efforts to Exit Russia Hampered as Local Court Freezes Assets

A Russian court ordered on Monday to freeze all Volkswagen assets in the country, marking the latest obstacle to the German automaker in its year-long effort to exit Russian operations. The carmaker has already suspended operations in the country like most other foreign automakers after the West imposed sweeping economic sanctions on Moscow over its invasion of Ukraine. The German auto giant has been looking to sell its Russian assets, including its plant in Kaluga, which has a production capacity of 225,000 vehicles a year and has been furloughed since March 2022.

Russian auto manufacturer GAZ, which was contracted to produce Volkswagen vehicles at its factory in Nizhny Novgorod, sought to halt any sale as part of a lawsuit after Volkswagen terminated the production agreement in August. GAZ said Volkswagen’s attempts to exit the Russian market put its own interests at risk and it is seeking 15.6 billion roubles ($201.3 million) in damages over the terminated contract.

A Russian court on Monday agreed to freeze all of Volkswagen’s assets in Russia while the dispute with GAZ plays out, further hitting VW’s attempts to wind down its Russian operations.

Volkswagen’s Russian subsidiary said it was surprised by the lawsuit and their partnership with GAZ had “ended on mutually-agreed terms”.

It also said the German group was in the process of selling its stake in Volkswagen Group Rus, including a plant in Kaluga with more than 4,000 employees “to a trustworthy Russian investor”.

Last week, Volkswagen Group brand Skoda said it was in the final stages of a deal to sell its Russian assets.

Moscow mandates that companies from “unfriendly” countries – those which have imposed sanctions on Russia – are required to win approval from a government commission for the sale of any Russian assets.

Foreign investors have feared Russia could take action to nationalize strategic assets since the restrictions on sales were brought in.

Last July Putin issued a decree to seize full control of the Sakhlain-2 gas and oil project in Russia’s far east, effectively taking almost 50% of the project from Shell and Japanese trading companies Mitsui and Mitsubishi.

Other leading Western carmakers have left the Russian market. Last year France’s Renault sold its majority stake in Avtovaz to a Russian state entity for a symbolic fee of one rouble – effectively writing off assets it previously valued at €2.2 billion.

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