Global powers are helping Ukraine by giving it money frozen from Russia. That spells bad news for companies still doing business there.

• Western firms in Russia risk losing their assets if the US touches Russia's frozen reserves, a think tank expert wrote.
• According to Elisabeth Braw, the Kremlin "has the power to harm any Western company it chooses."

Western firms will be hit hardest by the consequences of using Russia's frozen reserves, according to Atlantic Council Senior Fellow Elisabeth Braw.

In a piece written for the Center for European Policy Analysis, the expert outlined that the Kremlin would not stand idly by if the US and its allies tapped the $300 billion in Russian foreign funds that were frozen in 2022.

Instead, Moscow could target foreign holdings that remain in Russia, making Western companies vulnerable to costly expropriation risk.

"While the West holds Russian sovereign assets, the Kremlin has few Western holdings to seize in return," Braw wrote. "But Russia is home to lots of assets held by Western companies or individuals who stayed on after Russia's February 2022 all-out invasion of Ukraine. On May 23, the Russian President signed a decree allowing their confiscation."

The new ruling targets everything from securities, real estate, and property rights among US-owned assets, Reuters reported. That's on top of previous measures Russia introduced in retaliation to Western sanctions, such as the freezing of bank accounts owned by "unfriendly" non-residents.

Taking the Kremlin at its word, $290 billion worth of Western assets are liable for seizure. But even if this figure is inflated, the individual costs it poses to firms that stayed in the country are an expensive threat, Braw said.

"Earlier this month, Russia seized more than €700m ($757m) from three Western banks after a construction project fell apart as a result of Western sanctions. (The seizures follow earlier expropriations of companies including Carlsberg and Danone.)" she wrote. "Though this was court-sanctioned, it was also a clear signal from the Kremlin: it has the power to harm any Western company it chooses at any moment it wishes."

And leaving the country is no cheap task these days, as Russia has increasingly piled on restrictions. To exit, firms are now required to sell their holdings at a 50% discount, followed by a 15% exit tax, Braw said.

For its part, Western leaders have been wary of directly tapping the Russian funds, and are instead focused on the profits accrued from these reserves.

In late May, the European Council agreed on transferring this revenue to Ukraine, which could amount to over $3 billion a year. Kyiv could expect the first tranche of this funding by this summer, an EU sanctions envoy David O'Sullivan said in an interview with RBC Ukraine.

This story was originally published in June 2024.