In the short term, it is a way to reduce damage, but the conditions of his return will end up being imposed by Putin
Renault appears to be negotiating a smart way out of its Russian quagmire. The deal would allow the French automaker to hand over its facilities in the country to an unsanctioned local entity, with a buyback option within a few years. In the short term, the deal makes sense. In the long run, it seems illusory.
According to the Russian Ministry of Commerce, Renault would sell its Russian subsidiary Avtovaz -the manufacturer of Lada cars, with a Soviet reputation-, of which it has 68%, for a symbolic 1 euro to a research institute, NAMI, founded more than a century and is behind the design and manufacture of Russian cars. Renault has not commented on the matter.
This would be neutral for the balance of the French company, which has already announced that it would make an amortization of 2,200 million euros in the value of the assets. Another factory, currently producing Renault-branded cars, would be transferred on similar terms to the Moscow city government.
Renault would save money. It continues to pay the wages of the 45,000 workers it employs in Russia, although operations at its factories have been suspended for lack of components. On the other hand, the French group would avoid incurring the wrath of President Vladimir Putin in the face of companies from “hostile countries” rushing out. He would also keep his options open if he ever wants to return to Russia, where he controls 30% of the car market.
Renault has yet to agree with Russian authorities on the price at which it will be able to buy back its assets, which could happen in five or six years. But that part of the agreement shows that the French group has two illusions about its eventual return to the cold.
The first is to believe that Putin’s Russia is a rule of law where contracts are immovable. In reality, the terms of Renault’s return will be dictated, if and when the time comes, by whatever the Kremlin decides.
The second illusion is that things will “go back to normal” once the war is over, and that business will go back to business as usual, as if nothing had happened.
The only way for the return to Russia deal to work would be after a radical regime change in Moscow, which for now is unlikely at best. What matters now is that Renault gets out of Russia while minimizing the damage to its workers there.
