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Media giants relinquish Russian assets ahead of foreign ownership restrictions

A Russian law limiting foreign ownership of media has upended the sector, forcing companies to scramble to comply and throwing into doubt the fate of international TV channels, glossy magazines and news dailies in the once-thriving market.

In an atmosphere of increased distrust of the West fuelled by the Ukraine crisis, a law signed by president Vladimir Putin in October 2014, ordered media companies to be comprised of no more than 20 per cent foreign ownership as of January 1, 2016.

The legislation was allegedly required to prevent "foreign meddling", and its patriotic undertones are forcing international media groups to relinquish their once-prized Russian assets.

"Russia is the fourth largest market in the world for pay television in terms of the number of subscribers," said Olga Paskina, head of Discovery for north-east Europe, in an interview with Russian news site RBK.

"The market is growing (in Russia), as opposed to the United States where it is on the decline, or in Europe, where it is practically not growing at all."

American mass media giant Viacom could be forced to relinquish its control of 12 television stations that broadcast in Russia, including Nickelodeon, to a conglomerate belonging to Russian billionaire Viktor Vekselberg, RBK reported.

Swiss publisher Edipresse parted with 40 magazines in the country, while US-based Disney and Discovery decided to remain on the Russian market, reducing ownership to required levels, with the remainder of shares going to local partners.

German publishing giant Axel Springer announced last week that it had sold all of its Russian assets including GEO, OK! and the Russian version of Forbes to local publisher Alexander Fedotov.

The owner of the tabloid Bild, Germany's most-read newspaper, said it had to leave Russia because being limited to a minority stake was "not acceptable."

"When we entered the Russian market (in 2004), we believed in the further economic development and liberalisation of the country," said president Ralph Buechi in a statement last week. "We regret that we now have to leave."

Finland's Sanoma media group sold its 33 per cent stake in the business daily Vedomosti to Russian businessman Demyan Kudryavtsev in April.

The fate of the remaining shares in Vedomosti, owned by the Financial Times and The Wall Street Journal, is yet to be determined.

The newspaper is one of Russia's few remaining independent publications, with editorials frequently critical of government policy.

The legislation has sparked fears the independent and liberal-leaning Forbes and Vedomosti publications, as well the Ekho Moskvy radio station, could be stifled and face increasing pressure to tow the Kremlin's line.

The law "is a political declaration: we want to be sovereign, we want media outlets to be controlled by patriots", said Yekaterina Schulmann of the Russian Academy of National Economy and Public Administration.

Columnist Andrei Babitsky said the law stripped private media outlets of their "last defence against arbitrariness", and market experts predicted it would decrease the number of publications, including entertainment magazines.