Japan protests Russia’s takeover of tobacco giant’s local operations

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Japan has protested against a decree by Russian President Vladimir Putin placing the Russian operations of Japan Tobacco International (JTI) under the temporary management of a Russian company, demanding that Moscow withdraw the measure.

Putin signed the decree on Thursday, November 5. The move makes JTI the latest foreign company to lose control of its Russian operations and adds to growing tensions between Tokyo and Moscow.

According to Interfax, the decree transfers JTI’s stakes in four Russian companies — Donskoy Tabak, Petro, JTI Yelets and Kres Neva — to a company named JSC Industrial Assets. The order does not specify which registered entity bearing that name will manage the businesses. It is also the first time the mechanism has been applied to a tobacco company.

The affected facilities are located in St. Petersburg, Rostov-on-Don, and the Leningrad and Lipetsk regions. JTI employs around 4,000 people in Russia.

The measure is based on a decree issued in April 2023 that allows Russia to take control of assets belonging to companies from countries it considers “unfriendly”. Under this arrangement, the original owners retain legal ownership but lose practical control over management.

Russia accounts for approximately 10% of JTI’s revenue and 25% of its operating profit. Analyst Tsukasa Furuta of SMBC Nikko estimated that the company has between ¥100 billion and ¥200 billion in cash and deposits in Russia that could become inaccessible. JTI shares were set to hit their daily trading limit in Tokyo on Friday morning. Japan’s Finance Ministry owns 37.55% of the company.

Japanese Trade Minister Ryosei Akazawa said on Friday that Tokyo had lodged a protest and urged Russia to revoke the measure immediately. Chief Cabinet Secretary Minoru Kihara also confirmed that Japanese officials visiting Russia had raised objections with Moscow, while a Foreign Ministry official delivered the same demand to the Russian ambassador.

JTI said it was assessing the situation and possible responses, with priority given to its stakeholders, particularly employees.

The move follows Russia’s decision in September to place the local assets of Swiss food company Nestlé and French retailer Auchan under temporary management. According to NHK, some Western businesses subjected to the mechanism have subsequently been sold to Russian buyers at substantial discounts.

The latest development comes amid other tensions between the two countries. Putin visited Etorofu, one of the Russian-controlled islands claimed by Japan, in August. In October, Russia detained Hokkaido Shimbun journalist Yuki Imai on espionage charges.

Temple University professor James Brown said Japan’s financial support for a NATO programme purchasing US weapons for Ukraine had placed the country in a different category in Moscow’s view.