Elisabeth Braw—
The globalization love story involving Russia and the West is definitely over. In response to a plan by Group of Seven (G7) governments to seize assets belonging to Russia’s central bank, Moscow has announced it has a list of Western assets in Russia that it may seize should the G7 governments proceed with their plan. The Western assets are, of course, in Russia because the country was a prime destination for Western companies during the heydays of globalization. Today, by contrast, being present in Russia and China—the other prime destination—poses a risk to Western companies.
“It will be a significant blow to the main parameters of the international economy, it will undermine the international economy,” Kremlin spokesman Dmitry Peskov told journalists in late December. He was referring to news stories reporting that G7 leaders were trying to find a legal solution that would allow them to seize assets of around $300 billion belonging to Russia’s central bank. Those assets are, as is typical in the globalized economy, held in foreign institutions; other assets are held domestically. International rules ban foreign governments from seizing assets held in their countries unless the assets are linked to criminality, but Western governments inside and outside the Group of Seven are trying to find funds that can be used to pay for Ukraine’s postwar reconstruction. The costs are astronomical: already one year into the war, the World Bank estimated that they’d reached $411 billion. Ukraine doesn’t have that kind of money, and it would be hard for Western governments to convince their taxpayers that they ought to pay for harm caused by Russia. If the G7 governments were to proceed with their plan, Peskov warned, they risk losing the world’s trust. “It will undermine the confidence of other countries in the United States as well as in the EU as economic guarantors. Therefore, such actions are fraught with very, very serious consequences,” he added.
And Peskov issued an ominous threat: the Kremlin, he announced, has a list of Western assets that Russian authorities will seize if the G7 plans come to fruition. That’s the worst possible news for Western companies still present in Russia. After Russia invaded Ukraine in February 2022, many Western companies active in the country announced plans to leave, though only a few packed up and left straight away.
The early departees lost considerable amounts of money when they sold their operations to local buyers at fire-sale prices, but they were the lucky ones. Companies that waited longer found themselves facing an ever-increasing number of hurdles that had to be cleared before they could sell (and leave): a voluntary donation to the Russian treasury, then a mandatory donation to the treasury, permits, the scramble for a buyer, any buyer, and of course the obligatory government approval for the sale. To make matters even worse, Russian authorities started taking control of seemingly random companies’ assets in the country. In July 2023, for example, the French diary empire Danone and the Danish beermaker Carlsberg saw their Russian operations seized. Russia, which was so tantalizingly open for business in the 1990s, and even in the late 2010s, has become like Hotel California.
That’s why Peskov’s threat is so worrisome. Even though Western companies now know that their Russian operations risk being seized if Western governments seize Russian assets, the knowledge is useless because leaving the country is so challenging. Indeed, the many companies that have desperately been trying to leave can do nothing except filing ever-increasing paperwork. They’re sitting ducks. And the prospect of large-scale asset seizures by the Kremlin to avenge Western seizures is bound to worry Western decisionmakers. They don’t want their taxpayers to have to foot the bill for the reconstruction of a country whose devastation Russia alone has caused—but they also don’t want to put their countries’ businesses in jeopardy.
The perils facing Western companies in Russia illustrate globalization’s spectacular downfall. Expanding to Russia and China was the pinnacle of globalized business success. Today, operating there brings more danger by the week. Already in the spring of 2022, it became impossible for Western businesses to get new political-risk insurance coverage in Russia: no insurers were willing to cover the risk. Now it’s almost impossible in China too. It’s almost impossible, too, not to feel a bit sorry for the countless businesses that set themselves up in Russia (and China) thinking geopolitical harmony would last forever.
Elisabeth Braw is a Senior Fellow at the Atlantic Council, a Non-Resident Fellow of the European Leadership Network and a columnist with Politico Europe and Foreign Policy, where she writes on national security and the globalized economy. She is the author of God’s Spies and The Defender’s Dilemma.
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