Russia Threatens Seizure of Western Companies' Assets in Retaliation for Sanctions
Tensions escalate as Russia threatens to seize Western companies' assets in retaliation for sanctions, a move that could represent the most significant attack on private sector property rights since the fall of the Soviet Union. Meanwhile, discussions intensify on how to fund Ukraine's defense and recovery.
Western companies operating in Russia, despite warnings from their governments, have profited handsomely. Now, Russia's threats to confiscate their assets aim to pressure Western governments to halt financial support for Ukraine. The Kremlin's move, however, is widely seen as a weak justification, as these companies have not acted against Russia's interests.
The scale of potential seizures is staggering. Russia could target up to $215bn in Western derivatives and foreign investments under its jurisdiction. It has already begun confiscating assets, including those of brands like Carlsberg and Danone, and bank assets. If successful, this would dwarf the $500bn in Russian assets offshore, which are largely out of Moscow's reach.
Leaders like European Commission President Ursula von der Leyen, German Chancellor Friedrich Merz, and the British government are now considering using frozen Russian funds to support Ukraine. This could involve reparations bonds or loans, totaling up to 35 billion euros. However, Germany has so far rejected confiscation of Russian funds as reparations, citing fears of reciprocal claims. At least $164bn in frozen Russian taxpayer funds could bolster Ukraine's defenses for the next two to three years.
If Western companies' assets in Russia are not used to fund Ukraine, Western taxpayers may bear the brunt, raising concerns about moral hazard.
Russia's threats to seize Western assets in retaliation for sanctions have raised the stakes in the ongoing conflict. While discussions continue on how to fund Ukraine's defense and recovery, the potential seizure of Western companies' assets could have far-reaching implications for private sector property rights and international investment.
