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US sanctions authority paused KFC’s Russia exit

The owner of a master franchise in Russia says the US sanctions body delayed KFC’s exit from Russia by several months this year, commenting on an “exit tax” for departing foreign companies when the deal was on the verge of being finalised, Reuters reports.

New demands from Moscow originally delayed the departure of KFC restaurants and led the US Office of Foreign Assets Control, or OFAC, to get involved, creating further delays, according to Sergei Levin.

Levin heads the legal department of Unirest, which manages the former assets in Russia of Yum! Brands (YUM.N), the American parent company of KFC. Yum! Brands did not immediately comment on the situation.

This delay is a further proof of how difficult the process of companies exiting Russia is due to tightened restrictions. Company executives say they are finding it increasingly difficult to navigate the rules.

Yum! Brands completed its exit from Russia in April. The company transferred master franchising rights to Smart Service, a company headed by businessmen Konstantin Kotov and Andrey Oskolkov. The deal includes all Russian KFC restaurants, the operating system and the trademark for the Rostik’s brand. The price is not disclosed. Levin said:

“The process of finding a buyer and agreeing the basic conditions took some time. When the basic conditions were agreed, a rule appeared that the sale of shares should be agreed with the relevant (government) department.”

Once buyers were approved with this new requirement in mind, there was another one – budget contributions, dubbed the ‘exit tax’ by Washington, Levin said. Russia added this requirement in December 2022. Levin added:

“The closure was delayed again, the correct procedure on paying the exit tax was agreed. It seemed that all was agreed, everything was moving towards completion and then a foreign regulator appeared on the scene – OFAC. As a result, it took quite a long time to settle…we closed everything successfully in mid-April.”

In April, former KFC restaurants began opening under the name Rostic’s, giving a second life to a brand born shortly after the collapse of the Soviet Union.

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