Western companies that continued to operate in Russia after the outbreak of a full-scale war cannot receive their money earned in the country in 2022, as the Kremlin has blocked access to it. The Financial Times writes about this with reference to data from the Kyiv School of Economics (KSE). According to KSE estimates, the Russian authorities blocked a total of $18 billion. Current Time cannot confirm this information.
Russian income from Western companies was blocked after the Kremlin introduced a ban on paying dividends to enterprises from “unfriendly” countries in 2022. Although it can be bypassed in exceptional cases, few withdrawal permits have been issued, the FT points out. The executive director of a large company registered in a country that is not considered “unfriendly” in Russia also told the publication about the blocked money.
However, some companies were still able to circumvent the restrictions. Thus, the Russian subsidiary of the American Mars paid 56.1% of dividends to its parent company in 2022, “compensating them against its debts.” The Russian division of Japan Tobacco International, the only major tobacco company that did not leave Russia, paid $180 million to its sole shareholder, JTI Germany, in 2022. 20% of this amount was distributed after the start of the full-scale invasion. JTI representatives told the FT that the company made the payments from its 2021 profits.
As the FT writes, it is not only companies from “unfriendly countries” who face a ban on withdrawing their funds. The Kremlin is also preventing Indian energy companies from receiving money. As Indian oil industry spokesman Ranjit Rath told FT, we are talking about $400 million in dividends. The executive director of a large Russian company operating in India told the FT that this is Moscow’s response to the fact that a large amount of Russian oil exports are stuck in India.
Alexandra Prokopenko, a research fellow at the Russian Carnegie Eurasian Center, told the FT that Russian authorities have not yet developed a clear strategy to combat frozen assets. An FT source involved in transactions to exit a business from Russia said that permission to withdraw dividends has long been a kind of encouragement for “good behavior.” It, among other things, includes the company’s clear readiness to remain in Russia.
“However, given the strong desire of foreign companies to return their dividends, they will likely consider using them as leverage – for example, to urge Western authorities to unfreeze Russian assets,” Prokopenko emphasized.
