Russian President Vladimir Putin has ordered the seizure of Japan Tobacco’s Russian business, placing the assets of the company’s Russian subsidiaries under the “temporary management” of a local company. This move is set to further strain the already fraught relations between Moscow and Tokyo.

Japan’s finance minister Satsuki Katayama stated that Tokyo had lodged a protest and demanded Moscow reverse its decision. Japan Tobacco, the largest cigarette company in Russia with a 37% market share, confirmed that four of its manufacturing entities had been placed under temporary administration.

The incident marks a rapid deterioration in Russia-Japan relations, which have been strained by various factors, including:

1. Putin’s visit to the disputed Kuril Islands in the Pacific in August, drawing a strong rebuke from Japanese Prime Minister Sanae Takaichi.
2. The detention of a Japanese journalist working for the Hokkaido Shimbun on suspicions of spying for Japanese intelligence agencies, a claim Tokyo denied.
3. The International Criminal Court pursuing an arrest warrant for Putin over alleged war crimes in Ukraine, leading Moscow to demand the extradition of the court’s president, Tomoko Akane, and eight other officials.
4. Japan’s imposition of sanctions on dozens of Russian companies and individuals related to the country’s military-industrial complex and its “shadow fleet,” targeting Moscow’s energy export revenue.
5. Japan’s contribution in May to a Nato scheme to purchase US-manufactured equipment for Ukraine’s armed forces.

Japan Tobacco has also faced criticism for continuing to operate in Russia following the full-scale invasion of Ukraine, with Ukraine designating the company as a supporter of Russia’s war effort due to its tax payments to the Russian state.

Tokyo has resisted a mass withdrawal of businesses from Russia because of the importance of Sakhalin-2, a major gas project in the Far East in which Japan holds a stake, and other projects to its energy security.

The seizure of Japan Tobacco’s Russian business is expected to further strain the already tense relations between Russia and Japan, with both sides likely to take additional measures in response to the escalating situation.