Russian President Vladimir Putin seizes Russian Volkswagen factory in legal battle

Russian President Vladimir Putin gestures as he gives his annual state of the nation address in Moscow, Russia on Tuesday, February 21, 2023. Photo / AP

Volkswagen has lost control of a vast car plant in Russia as part of a legal battle with a carmaker controlled by sanctioned oligarch Oleg Deripaska.

A Russian court has frozen Volkswagen’s assets in the country, including its large plant in Kaluga, western Russia, after the German car giant was sued by its former joint venture partner.

Russia’s GAZ is suing VW for about $200 million ($320m), claiming it broke a contract when it withdrew from the country last year. The German carmaker denies the allegation.

The US Treasury said in 2018 that GAZ, one of Russia’s leading vehicle manufacturers, was “owned or controlled by, directly or indirectly, Oleg Deripaska”, the Russian oligarch.

Deripaska has been sanctioned in the US, Britain and the EU in the wake of Russia’s invasion of Ukraine because of his connections to the Kremlin. British officials have deemed that he has acted “on behalf of or at the direction of” Vladimir Putin.

Russia’s GAZ is suing VW for about $200 million, claiming it broke a contract when it withdrew from the country last year. Photo / Bevan Conley

GAZ built more than 52,000 vehicles for Volkswagen under the Skoda and VW brands in 2021. The company produced the cars under licence at its factory in Nizhny Novgorod, a city 250 miles east of Moscow.

Before the invasion, Volkswagen also built vehicles in Russia at the Kaluga plant, which had a production capacity of 225,000 cars a year and employed 4,000 people. However, the site has been closed for more than a year as Volkswagen tries to sell its assets in Russia.

While rival Renault disposed of its stake in Lada owner Avtovaz for a nominal sum in May last year, Volkswagen has struggled to offload its assets.

A Volkswagen spokesman said: “We are aware of the claim from GAZ and we are reviewing the materials of this case at the moment.”

GAZ was approached for comment.

Packaging maker Smurfit Kappa has disposed of its Russia assets, selling the mills to local management. The company will take a €128m ($220m) accounting hit from the sale.