Earlier in the week, Vladimir Putin signed a decree stipulating the state would be responsible for “temporary management” of the assets belonging to the subsidiaries of Finland’s Fortum and Germany’s Uniper. Both energy companies are now headed by managers with ties to Rosneft. Russian assets of Fortum and Uniper are estimated at $6 billion.

Formally, Russia’s Federal Agency for State Property Management can only manage the assets but not sell them — the ownership is retained by the former proprietors. But in practice, this difference does not amount to much. It is highly likely that the shares of both will end up being owned by Rosneft.

Others’ property was openly taken away only in special cases — for example, Russian airlines refused to return rented Western planes, because otherwise Aeroflot would have to close down the next day. Furthermore, foreigners were prohibited from selling Russian stock, but that was done mostly to limit the outflow of the capital.

Now, Vladimir Putin has decided to go further — and to get revenge on the West for Russian assets being arrested abroad. The first victim was not accidental. Recently, the Bundestag approved the sale of Rosneft’s shares in a German oil refinery. The state company tried to contest the decision, but the German government ruled that having Rosneft as a proprietor threatened the country’s energy security (currently, Rosneft is one of the biggest players on Germany’s oil refinery market). In total, Russian companies, including Rosneft and Gazprom, could have lost $22 billion worth of assets abroad.

The Kremlin spent a long time in the denial stage, assuming that the desire to earn money in Russia would outweigh all other motivations, just like after the annexation of Crimea in 2014. The nationalisation bill was considered in April 2022, but back then it was not approved. The government limited itself to a 50% sale discount and started requiring approval of all deals with a foreign assets commission (and in case of the energy sector, all deals had to be approved by Putin personally).

In the last months, the pressure increased. Upon leaving the Russian market, Western companies have to pay a “voluntary contribution” — 5-10% of the sale price. Starting from December 2022, the federal budget received at least 20 billion rubles (€220 million) through that move. Furthermore, the “excess profit tax” that is being developed by the Ministry of Finance, will apply to non-residents, too. In total, the budget could gain another 150 billion rubles (€1.65 billion) from the fleeing businesses in 2023.

For many companies, investing in Russia turned out to be a one-way ticket. Negotiation of a sale of foreign assets can take up months if not years — there has been a large queue of companies wishing to exit the Russian market since last spring. However, there are no guarantees of success. Fortum, too, was close to reaching a deal but instead ended up being controlled by the state.

For now, the decision on external management only targets specific companies. In this situation, the people involved are important — even before the war, the assets desired by Igor Sechin (Russian oligarch and close associate of Putin — translator’s note) were in a vulnerable position. On the other hand, some companies get lucky — Shell recently exited all Russian projects and even withdrew 95 billion rubles (€1.05 billion) from the country.

Nationalisation will definitely not end at just two companies. The Kremlin is forming a “compensation fund” to continue its confrontation with the West. Both financial assets and foreign citizens (for example, WSJ journalist Evan Gershkovich) end up as hostages. Any company from an “unfriendly country” can be nationalised, Putin’s spokesman Dmitry Peskov previously warned. Now those who were unable to leave or did not manage to do so in time will lose everything.

The day before the presidential decree was signed, the banker had called for seizing foreigners’ property as retaliation for arrests of Russian legal entities’ assets. Obviously, with the goal of privatising it, that is, giving it to “patriotic” businesses.

Many say that the new 1990s are beginning in Russia, the only difference being that it is not state property being stolen this time around but foreign property. And they have a point. An entire class of large owners who benefited from the war is being formed — when could one ever before buy a modern factory or the biggest fast-food chain in the country for next to nothing?

The Kremlin knows that this expropriation will not go unanswered. The Finance Ministry is already planning on making a classified register of Russian property abroad. In response, the West could speed up the development of a legal basis for confiscation of the Russian Central Bank’s gold and foreign exchange reserves worth $300 billion (they are currently frozen, but to use them — for example, to aid Ukraine — is prohibited by international law).

Experts estimate that preparing a legal basis to confiscate these assets could take up to 10 years, but now the West has a reason to do it quicker. In the end, it is not only Rosneft that needs to compensate for its losses.