By Timothy S. Donahue
Top Takeaways:
- Russian Intervention: Four Japan Tobacco subsidiaries have been placed under temporary management by a Russian company.
- Japanese Protest: Tokyo has formally demanded that Moscow reverse the presidential order.
- Business Uncertainty: Japan Tobacco is assessing the impact, while Japanese officials seek to protect the company’s assets.
Russia has taken control of four Japan Tobacco subsidiaries, and Tokyo wants them back.
Japan’s government lodged a formal protest with Moscow after Russian President Vladimir Putin ordered that four subsidiaries of Japan Tobacco Inc. (JT) be placed under the temporary management of a Russian company.
Chief Cabinet Secretary Minoru Kihara said Friday that senior Japanese government officials traveled to Moscow and joined Japan’s ambassador in demanding that the measure be withdrawn. Russia accounts for approximately 25% of JT’s adjusted operating profit, according to reporting on the company’s operations.
“To make sure the legitimate interests of Japanese nationals and businesses are not violated,” Kihara said, was the protest’s purpose. JT confirmed that four of its manufacturing subsidiaries in Russia had been placed under temporary management by presidential order.
The company said it was gathering information, considering its response, and assessing the potential impact on its operations. The order places the subsidiaries under Russian management but, by itself, does not establish that ownership of the businesses has been permanently transferred.
Shares of Japan Tobacco fell 19.3% on Friday—the largest single-day drop in the company’s history.
Russian reporting identifies the four affected subsidiaries as JTI Donskoy Tabak, JTI Yelets, Kres Neva and Petro, with management transferred to a company called Promyshlennye Aktivy (Industrial Assets).
JTI controlled up to 40% of the local market and manufactured cigarettes in Russia under the Winston, Camel, Sobranie, and LD brands.
The move follows a series of similar Russian actions targeting the assets of foreign companies operating in the country. Japan’s Economy and Trade Minister Ryosei Akazawa said that Moscow has increasingly placed Western-owned assets under temporary Russian control since September.
“To be honest, we have been cautious,” Akazawa said. “We will continue to communicate with the Russian government in order to protect the assets of the Japanese companies.”
The Japanese government has a direct financial stake in the dispute. Japan’s Finance Ministry holds a 37.55% stake in JT, making JT partly government owned. Finance Minister Satsuki Katayama said authorities would coordinate with the company and relevant ministries as the situation evolves.
She said Japan planned to “respond appropriately by cooperating closely with relevant ministries and JT, while watching the development.”
The intervention comes amid deteriorating relations between Moscow and Tokyo, including their longstanding territorial dispute over Russian-controlled islands claimed by Japan and the recent detention of a Japanese journalist in Russia.
Russia’s TASS news agency said that Putin’s order is based on a decree issued in April 2023 that established a mechanism for temporarily seizing assets belonging to entities from unfriendly countries. It was a response to sanctions placed on Russian nationals and the seizure of their assets by other countries, TASS said.
JT has not disclosed the financial impact of the temporary management order or indicated whether the intervention will affect production, distribution, or sales.
