Putin Critic Warns Kremlin Will Seize More Assets to Punish Its Enemies

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(Bloomberg) — Sergey Petrov could do nothing from his home on the outskirts of Vienna when Russian President Vladimir Putin wanted to take over the car dealership he founded and built.

Putin signed the decree in December transferring ownership of Rolf, Russia’s largest car dealership, from a Cyprus-registered company controlled by Petrov’s family to state real estate agency Rosimushchestvo for temporary management. Soon after, armed officers raided the company’s headquarters to ensure that the appointment of a new board went smoothly, Petrov said.

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“It’s a kleptocracy,” Petrov said in an interview at his home in Austria, where he has been a permanent resident since 2016. “There are no laws, only the selective application of justice.”

During Putin’s two-and-a-half-decade rule, Russia has sought to build state champions and at times used the criminal justice system to hand over assets to Kremlin allies. This accelerated after Russia invaded Ukraine, leading to a breakdown in relations with the West and increasing pressure on private companies to publicly support the war.

Petrov’s family kept Rolf through Delance Ltd. that was vulnerable to laws allowing Putin to seize the assets of some foreign companies because Cyprus is classified by Russia as a so-called unfriendly country. Russian lawmakers have yet to ratify an agreement with Cyprus on reciprocal investment protection, hampering efforts to seek 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 is becoming increasingly comfortable using the justice system to interfere in business and reward loyalists. He said the harassment by prosecutors was politically motivated and stemmed from his criticism of the Russian leader’s actions, such as when he failed to take part in a vote on the annexation of Crimea as a member of the Russian parliament in 2014. In 2011 and 2012, he also openly supported the largest anti-government protests against Putin’s rule.

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Russian authorities opened a criminal investigation against him in 2019, accusing him of illegally transferring money abroad. Petrov says the allegations were based on unclear rules and that the courts ignored significant procedural flaws when they sentenced one of his managers, a co-defendant in the case, to a prison term of more than eight years.

The Kremlin did not respond to a request for comment from Bloomberg. Representatives for Rolf also did not respond to requests for comment.

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

While the decision was being appealed in Russia, Petrov said it was unlikely to succeed and he hoped to receive compensation by following the plan of the now-defunct Yukos Oil Co., once Russia’s largest oil and gas company. Two decades-long legal battles resulted in $50 billion in compensation for former shareholders over claims that Russia was politically motivated when it imposed multiple tax demands on Yukos Oil that ultimately led to bankruptcy. Russia has said it will not pay

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His lawyers have filed a lawsuit with the United Nations Human Rights Committee under the International Covenant on Civil and Political Rights – a treaty from which Russia has not yet withdrawn. They also explore options for arbitration. Read more: Rush of asset seizure cases puts Putin’s tycoons on high alert

A settlement with prosecutors, as in the case of sanctioned billionaire Andrey Melnichenko, who was allowed to keep some energy assets after his company agreed to contribute funds to charity projects, is unlikely, according to Petrov.

Currently, the company is working with government regulators who are pressuring managers to stay on board, Petrov said. Already suffering from the sanctions-induced shift from selling Western vehicles like Porsches and Mercedes Benz to offering Chinese brands and used cars, he fears things will get worse for Rolf.

Umar Kremlev, the head of the International Boxing Association and its Russian national organization, has been introduced to the company as the future owner, Petrov said. Under Kremlev, the international boxing federation was stripped of the right to stage Olympic boxing tournaments in Tokyo in 2021 and Paris in 2024 because of concerns about the group’s leadership and its Russian boss was accused of using violent and threatening language toward Olympic committee staff to have Associated Press.

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Since the start of the Ukraine war, Russia has become increasingly aggressive in seizing assets from local tycoons. Prosecutors have filed at least 55 asset nationalization cases since Moscow’s invasion of Ukraine began two years ago, according to a study published in December by the Moscow newspaper RBC. At times, these transfers were made in violation of laws requiring auctions to divest state-owned companies, Petrov said. Read more: Russian tycoons look to China to save decimated car industry

The Russian division of the food company Danone is subject to a similar temporary management system. A dairy company owned by a member of a management team linked to Putin loyalist and Chechen leader Ramzan Kadyrov is set to buy the asset, the Financial Times reported in February.

Other production sites have come under government supervision, including units of Carlsberg A/S and the US company AgroTerra. In the automotive industry, a company affiliated with Rolf competitor Avilon bought disused Volkswagen AG and Hyundai Motor Co. plants.

“They tried to buy the cheapest way possible, hoping to make money,” Petrov said of the asset purchases. “It’s speculation.”

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