LONDON (Reuters) -A U.S.-owned canned food company seized by Russia to safeguard domestic food supplies is planning to boost dwindling sales with exports to China and North Korea, according to documents reviewed by Reuters and people familiar with the matter.

Washington has said the treatment of Glavprodukt, the only U.S. company Moscow has seized, will influence a planned reset of U.S.-Russia relations which appear to have stalled.

Glavprodukt, the largest canned food producer in Russia, was founded by Los Angeles-based Leonid Smirnov and seized by the Kremlin in October 2024. Moscow argued that the company is of strategic importance to Russia's food supply.

Sales have dropped sharply, documents showed. Production has remained at similar levels, so the oversupply has left the company trying to find new markets and increase its warehouse capacity, according to strategy documents and two people familiar with the matter.

"They claimed they took my company to secure food for Russia. But they are not living up to this purpose, this justification," Smirnov told Reuters.

Smirnov is fighting in court to regain his company. The next hearing is scheduled for July 11 at the Moscow Court of Arbitration.

In June, Glavprodukt's new state-appointed management team proposed exporting to new markets, including North Korea and the Middle East, the documents seen by Reuters showed. They also sought to increase sales to China, a market that made up about one percent of Glavprodukt's sales last year.

Glavprodukt's new management did not respond to multiple emailed requests for comment.

The strategy shift shows how Russia's trade has changed since invading Ukraine. Trade with North Korea, China and other countries that have not imposed sanctions against Russia can take place outside Western influence.

Glavprodukt's pivot appears inconsistent with Vladimir Putin's position on June 27 in Minsk that he wants to welcome American companies back to Russia.

Negotiations between the U.S. and Russia over the war in Ukraine have stalled with President Donald Trump expressing disappointment after a July 3 phone call with Putin.

Separately, relations between the U.S. and China have deteriorated since Trump targeted China with trade tariffs, leading to retaliation from Beijing. The two countries agreed to a trade framework last month but the U.S. had said it may restore tariffs on Chinese goods in August.

The Kremlin's plans for Glavprodukt reflect Russia's approach to managing foreign-owned assets under state control.

In April, Reuters reported that Glavprodukt would be used to supply food to the Russian army.

Reuters could not determine whether supplies to the army had started.

STRATEGIC ASSET

Moscow has placed around a dozen foreign companies under temporary management since invading Ukraine in February 2022.

Danish brewer Carlsberg and French yoghurt maker Danone saw their assets eventually sold off to Kremlin-friendly buyers at knock-down prices.

Among other companies with assets still in Russia are U.S. multinationals Procter and Gamble and PepsiCo.

Russia has regularly justified asset seizures by labelling companies as strategic.

Russia's Prosecutor General used similar reasoning when arguing that the preliminary court hearing for Glavprodukt should be closed to the public, according to sources familiar.

The Prosecutor General's office did not immediately respond to a request for comment.

Glavprodukt's financial results have rapidly deteriorated, according to filings seen by Reuters, sliding from modest profitability to a regular monthly net loss.

Last month, the Ministry of Agriculture asked the company to explain why sales were substantially down, according to two sources.

Companies which are seized and handed to management teams are under pressure to maintain employment and growth, they said.

The Agriculture Ministry did not immediately respond to a request for comment.

The strategy documents seen by Reuters reveal that Glavprodukt is looking to develop its e-commerce sales channels and come up with plans to increase exports to China, as well as highlighting markets in Africa and South Asia where demand for Glavprodukt's canned fish could be high.

Employees have sought to register the company's trademark in China, the documents showed.

A pre-paid shipment to China of goods like canned fish and condensed milk has not arrived on time, the documents showed, highlighting the potential pitfalls of expanding exports.

($1 = 78.1500 roubles)