Volkswagen has lost control of a vast car plant in Russia as part of a legal battle with a car maker controlled by sanctioned oligarch Oleg Deripaska.
A Russian court has frozen Volkswagen’s assets in the country, including its large plant in Kaluga, western Russia, after the German car giant was sued by its former joint venture partner.
Russia’s GAZ is suing VW for about $200m, claiming it broke a contract when it withdrew from the country last year. The German carmaker denies the allegation.
The US Treasury said in 2018 that GAZ, which is one of Russia’s leading vehicle manufacturers, was “owned or controlled by, directly or indirectly, Oleg Deripaska”, the Russian oligarch.
Mr Deripaska has been sanctioned in the US, UK and EU in the wake of Russia’s invasion of Ukraine because of his connections to the Kremlin.
UK officials have deemed that he has acted “on behalf of or at the direction of” Vladimir Putin.
GAZ built more than 52,000 vehicles for Volkswagen under the Skoda and VW brands in 2021. The company produced the cars under licence at its factory in Nizhny Novgorod, a city 250 miles east of Moscow.
Prior to the invasion of Ukraine, Volkswagen also built vehicles in Russia at the Kaluga plant, which had a production capacity of 225,000 cars a year and employed 4,000 people at its peak.
However, the site has been shuttered for more than a year as Volkswagen tries to sell its assets in Russia, amid the ongoing war.
While rival Renault disposed of its stake in Lada owner Avtovaz for a nominal sum in May last year, Volkswagen has struggled to offload its assets.
GAZ asked a court to halt the sale, Reuters reported, as it seeks damages for alleged breach of contract.
A Volkswagen spokesman said: “We are aware of the claim from GAZ and we are reviewing the materials of this case at the moment.”
The company said it was “surprised” by the claim and said the partnership ended on mutually-agreed terms in the middle of last year.
Volkswagen is in the process of applying for approval by the Russian State authorities to sell its shares in its Russian business, including the Kaluga plant to a “reputable Russian investor”, it said.
GAZ was approached for comment.
Western car makers fleeing the country has cut car production in Russia by a third. As well as relying on Western designs, local manufacturers also need to import parts, the supply of which has been cut off.
Following Renault’s sale of AvtoVaz, reportedly for one rouble, Lada production has been slowly growing again, albeit for basic models stripped of many of their safety systems.
Skoda, which is owned by Volkswagen, said earlier in the week that it is close to a deal to exit Russia.
Separately packaging maker Smurfit Kappa said it has disposed of its Russia assets, selling the mills to local management. The company will take a €128m (£111m) accounting hit from the sale.