Volkswagen’s decision to wind down its Russian operations in response to the war in Ukraine was given a cool reception by VW’s Russian partners, and now things just got frostier. A Russian court has frozen Volkswagen’s assets in the country, preventing the German automaker from selling up.
Like other automakers, including Renault, VW halted operations in Russia last year, but now one local company contracted by Volkswagen to produce vehicles has accused VW of breach of contracting court and prevented any assets being sold.
Russian automaker GAZ had a deal with VW to produce vehicles at its Nizhny Novgorod site, but VW terminated the agreement in August 2022, a move GAZ says put its business at risk. Reuters reports that GAZ filed legal papers demanding 15.6 billion roubles ($198 million) in damages, and a court has responded by freezing all of VW’s assets in Russia until the case is settled.
That decision is a major roadblock in Volkswagen’s attempts to sell off its assets and exit the country. Other automakers have already been forced to take big hit to get out. When Renault exited Russia last year it sold its stake in the country’s Autovaz to the Russian state for one single rouble – barely more than one U.S. cent – despite its assets having been previously valued at $2.35 billion.
Related: Volkswagen Reportedly Ending Operations At Russian Nizhny Novgorod Plant For Good
Earlier this week Volkswagen Group subsidiary Skoda said it was close to concluding the sale of its own assets in Russia, a process which is massively more complicated than it was before Vladimir Putin’s troops invaded Ukraine. Companies hailing from countries who have applied sanctions on Russia and are therefore viewed as unfriendly must now win approval from Russia’s government before any sale can proceed.
“The Volkswagen Group has received the news about the war in Ukraine with great dismay and shock,” the company said in a statement in March 2022, when it decided to halt both the production of vehicles in Russia and the export of vehicles to Russia. “Volkswagen continues to hope for a cessation of hostilities and a return to diplomacy,” it added, but one year on, there’s no sign of that happening.