Court Seizes Volkswagen’s Russian Assets In Ukrainian War Dispute

A court has frozen Volkswagen’s Russian assets in an ongoing dispute with Russian automaker GAZ and its sanctioned billionaire oligarch owner, Oleg Peripaska.

In a move which surprised Volkswagen, the court in Nizhny Novgorod seized the German automaker’s Russian assets after Peripaska sued it for breach of contract after Volkswagen broke off its agreements with GAZ in August.

The Nizhny Novgorod regional court of arbitration, based east of Moscow, froze all Volkswagen Group Rus assets on March 17.

Volkswagen had been trying to sell its Russian factory in Kaluga, which has a 225,000-vehicle annual capacity, and was tipped to have found a buyer in Russian dealer group Avilon.

But the lawsuit by GAZ, which is involved with Volkswagen in the smaller factory in

Nizhny Novgorod, has stopped the deal.

In its cooperation agreement with GAZ in 2017, the Volkswagen Group signed on for the “prolongation of the contract assembly of cars at the plant in Nizhny Novgorod, supply of Volkswagen engines for light commercial vehicles of GAZ brand and, agreement on intentions to consider the possibilities of a strategic partnership between Volkswagen Truck & Bus and GAZ Group.”

Like most automakers, the Volkswagen Group shuttered its Russian businesses after the western sanctions that followed the country’s invasion of neighbor, Ukraine, in 2022. Its Russian plants have been idle since March, 2022.

Most of its brands, including Audi, Skoda, Lamborghini, Bentley, Ducati and Volkswagen, were sold in Russia, while it also built the Volkswagen Polo, the Skoda Kodiaq, the Skoda Rapid and the Volkswagen Tiguan there.

Its Kaluga plant built its millionth vehicle in 2016, and was produced 118,000 cars in 2021, while the Nizhny Novgorod GAZ plant made 52,000, helping the Volkswagen Group to an 11.9% share of the Russian new vehicle market in 2021.

GAZ sued Volkswagen in Russian court last August, claiming US$203 million in losses from the terminated contract, while Volkswagen is still requesting approval from Russian authorities to sell the Kaluga plant.

“Volkswagen is in the process of applying for approval by Russian state authorities for selling its shares of Volkswagen Group RUS, and thereby also the Kaluga plant with its more than 4,000 employees to a reputable Russian investor,” a company spokesman said.