Updated: Putin's threat to nationalize idled plants could hit rubber industry

Rubber industry companies—including Bridgestone, Continental A.G. and Dow Inc.—have joined a host of others outside the industry in curbing their operations in Russia, amid the country's ongoing, unprovoked attacks on Ukraine and its citizens.

On March 10, Russian President Vladimir Putin said he is considering nationalizing the assets of Western companies that leave the country, as part of an effort to preserve jobs.

Jen Psaki, White House press secretary, confirmed that the Biden administration is aware of the potential action by Putin and has pledged to back American companies that make the decision to cut business ties with Russia.

"We have seen reports that Russia may be considering seizing the assets of U.S. and international companies that have announced plans to suspend operations in Russia or to withdraw from the Russian market," Jen Psaki, White House press secretary, tweeted March 10. "These decisions are ultimately up to companies. As President Biden said earlier this week, we welcome the decisions of companies to exit Russia because they want no part of Russia's war of choice against Ukraine."

Regarding tire makers, Continental A.G. and Nokian Tyres P.L.C. each operate tire plants in Russia.

Bridgestone is the latest tire maker to disclose changes to its Russian operations, saying March 14 that it was working to ensure the safety and well-being of its employees.

“We condemn any form of violence and hope that peace can quickly be re-established. Our primary concern in this crisis, is the safety of our employees and their families,” Bridgestone said.

Continental, which also has a ContiTech facility on the same grounds as the tire facility in Kaluga, disclosed plans to idle operations at both locations last week.

The company declined to comment on any potential nationalizing of assets in Russia. It did, however, note that the transition in manufacturing from Russia to other plants is going smoothly and that it should be able to meet tire demand in Europe in the near term and is working to mitigation supply chain concerns.

“We are continuing to monitor the situation very closely and are constantly reviewing all options available to us,” Continental said in an emailed statement to Rubber News. “At present we are able to meet our supply obligations. However, we expect the supply situation for raw materials required for tire production in Europe to gradually deteriorate in light of the sanctions imposed and the further worsening of logistics bottlenecks. We have therefore activated corresponding contingency plans that include safety stocks and alternative suppliers.”

Nokian was the first tire maker to adjust its operations at a plant near Moscow. This plan, established before Russia’s invasion of Ukraine, transitions production from Russia to plants in the U.S. and Finland.

The Finnish tire maker declined comment regarding Putin’s threat to nationalize idled facilities in Russia.

“We don’t wish to speculate on matters such as these,” Nokian told Rubber News. “We have built contingency plans and are actively executing them as circumstances evolve.

“The safety of our team members is our number one priority. We are committed to maintaining best possible business continuity for our partners, continuing to plan and react to minimize any impacts to customers and consumers.”

Nokian also declined to say how much production has been moved from Russia and how much its facilities in Finland and Dayton, Tenn., have picked up in recent weeks.

“We cannot provide specific data, but we can share that our North American factory in Dayton, Tenn., continues to grow at a robust rate and already produces many of our most popular North American products,” Nokian said. “This provides the flexibility to increase the proportion of North American products made here. That allows us to better serve customers and reduce our reliance on overseas manufacturing.”

Dow, meanwhile, is working to slow its own operations in Russia. The company, so far, has not responded to Rubber News’ request for comment.

The threats from Putin come as the U.S. and its G7 partners prepare to ramp up sanctions, adding additional economic pressure to Russia.

These include at least seven measures banning new U.S. investments in any Russian business sector, according to a White House fact sheet.

"President Biden has already banned new U.S. investments in the Russian energy sector," the White House fact sheet said. "This (executive order) will establish the legal authority for future investment restrictions in any sector of the Russian economy, as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, by a United States person."

Other measures announced include:

• revoking Russia's most-favored nation status;
• banning export of luxury goods to Russia;
• banning import of goods from key sectors such as seafood, spirits/vodka;
• denying borrowing privileges at multinational financial institutions;
• full blocking sanctions on Russian elites and their families; and
• monitoring virtual currency transactions.

"These actions will collectively ramp up pressure on Putin and build on the unprecedented package of economic sanctions and export controls the United States and over 30 countries have already imposed on Russia," the fact sheet statement said.

"Today, the ruble is trading at its weakest level ever and is worth less than a penny; the Russian stock market is closed for the longest time in history; the Russian government's credit rating has been downgraded to 'junk' status, and we're seeing a mass exodus from Russia by the private sector—the result of our historic, multilateral coordination and commitment to ensure that Putin's war of choice is a strategic failure," the statement added. "Russia has now become a global economic and financial pariah."