Japan Tobacco Loses Control of the Russian Business Behind a Quarter of Its Profit

Russia has placed seven Japan Tobacco group companies under a state-appointed manager, extending appointed control across the company's whole Russian operation.

The second decree, dated November 6, added JTI Russia, JTI Innovative Products and Pereslavl-Tabak to the list. It placed 100 percent of each company's shares or ownership interests under temporary management.

All three belonged to JTI Investments Sarl, the group's European holding company. They run the importing, selling and corporate management of the Russian business, according to Interfax.

Factories first, then the whole operation

A first decree, signed November 5, had already placed four manufacturing companies under the same manager. They are Petro in St. Petersburg, JTI Donskoy Tabak in Rostov-on-Don, JTI Yelets in the Lipetsk region and Kres Neva in the Leningrad region.

The manager is Promyshlennye Aktivy, a Russian joint-stock company known in English as Industrial Assets. Temporary administration leaves legal ownership with Japan Tobacco, but it moves management control to Moscow's appointee.

Russia created the mechanism in April 2023 for assets whose owners are based in countries it calls unfriendly.

Japan Tobacco confirmed the first decree in a statement on November 6. It said four of its manufacturing subsidiaries had been placed under temporary administration, and that it was assessing the details, the impact on the group and the options open to it.

“We are assessing the situation and our options, prioritising our stakeholders, most notably our employees,” the company said in an emailed statement issued after the first decree.

A quarter of the profit pool

JTI is Russia's largest tobacco manufacturer, selling brands that include Winston and Camel cigarettes. The Russian business accounts for about 10 percent of the Japan Tobacco Group's revenue and roughly 25 percent of its operating profit, Reuters reported.

The exposure is recent as well as large. In October, Japan Tobacco raised its full-year forecast and cited higher cigarette prices in Russia among the reasons.

For shareholders, the question has changed. It is no longer whether the Russian business earns money, but whether Japan Tobacco still controls it — and whether the profits earned there can leave the country.