Putin Expands Temporary Administration of JTI’s Russian Assets to Include 3 More Companies

Key Facts

Russian President Vladimir Putin on November 7 expanded the list of Japan Tobacco International assets placed under the temporary administration of Promyshlennye Aktivy, Vedomosti reported, citing the published decree. The measure adds three Russian companies to the assets whose management was transferred to the Russian company. The additions include 100% of the shares in Pereslavl-Tabak and 100% of the stakes in J.T.I. Innovative Products and J.T.I. Russia. The three companies are owned by JTI Investments Sarl, according to the report. The decision places administrative control over additional group assets under temporary management without, as the measure is described, transferring their ownership permanently.

The expansion follows an earlier decree signed by Putin on November 5, Interfax reported, while the second decree is dated November 6 and was published on the official legal information portal. The first decree transferred JTI entities’ stakes in four Russian companies—Donskoy Tabak, Petro, JTI Yelets and Kreon Neva—to Promyshlennye Aktivy. The first measure thus covered four companies, and the subsequent decision added three more to the scope of temporary administration. Interfax said the mechanism had not previously been applied to the assets of global tobacco companies in Russia. The decree gives no publicly stated reason for the move, according to available coverage of it.

Temporary administration means the company remains the owner of the assets but effectively loses the right to manage them, according to an explanation by Jiji Press published by Nippon.com. This distinction defines the nature of the measure affecting the group’s companies: management control is transferred without describing the action as a final seizure of ownership. Interfax noted that presidential decrees do not usually include additional identifiers for the Russian company named Promyshlennye Aktivy. It said the absence of those identifiers makes it impossible to determine which entity registered under that name will manage JTI’s local operations. This leaves the identity of the registered entity that will manage the Russian business unspecified in the decree, the agency said.

JTI has operated in Russia since the company was established in 1999 and became the leader of the Russian tobacco market in 2007, before strengthening its position by buying Donskoy Tabak in 2018, Interfax reported. This long-standing presence gives the Russian market weight in the group’s business: Investing.com estimated that Russia accounts for about 10% of Japan Tobacco’s revenue and 25% of its operating profit. These figures underscore the financial importance of the Russian business to the group, while the company continues to assess the new measure’s actual impact. In a statement cited by the Associated Press, the group said its four manufacturing companies in Russia had been placed under temporary administration by presidential order. The company was assessing the potential impact on its business after the first measure.

After reviewing the decree, Japan Tobacco said it was "analyzing the situation and considering possible measures, while prioritizing employees and partners," Interfax reported. Regarding the November 5 decree, the company had said it was gathering information about the measure, considering its options and assessing its potential impact on the group, according to Tobacco Reporter. This reflects its continued assessment of the consequences as temporary administration extends to additional companies. Available sources have not reported the outcome of that assessment or any final action by the company in response to the two decrees. Protecting the interests of employees and partners remains among the priorities Japan Tobacco cited in its statement.

In Japan, the Foreign Ministry protested the transfer of the group’s assets to temporary administration and lodged a protest with the Russian ambassador in Tokyo, Interfax reported. The Associated Press also said Tokyo called for the measure covering the four companies in the first decree to be withdrawn immediately. Japan sent senior government officials to Moscow to join its ambassador in lodging the protest and calling for the move to be reversed. Japanese Economy and Trade Minister Ryosei Akazawa said the country would continue engaging with the Russian government to protect Japanese companies’ assets. Finance Minister Satsuki Katayama added that her ministry holds a 37.55% stake in Japan Tobacco and would coordinate with relevant authorities and the company to monitor developments.

Trading in Tokyo on November 6 reflected pressure on Japan Tobacco shares after the four initial companies were placed under temporary administration. The stock’s bid and ask price stood at 6,269 yen at 11:30 a.m. Tokyo time, down 19.3% from Thursday’s record close of 7,769 yen, Investing.com reported, citing Reuters. The Nikkei 225 was down 5.7% by midday that same day. In November 6 trading, JAPAY closed at $16.98, according to EL7 data. These figures relate to a session before the asset list was expanded on November 7; the evidence contains no data on the stock’s response to the later decree.