Russia traps billions on dollars in Western companies’ profits

Western companies that have continued to operate in Russia since its full-scale invasion of Ukraine are unable to access billions of dollars of their profits and move them out of the country, the Financial Times reports.

By the end of 2022, companies from so-called ‘unfriendly’ nations—designated so by Russia due to their support for Ukraine—had generated at least USD 18 billion in profits, according to the Kyiv School of Economics (KSE), a think-tank.

Companies from beyond the ‘unfriendly’ countries have faced the restrictions as well, according to the FT.

“Tens of billions in dollar terms are stuck in Russia. And there is no way to get them out,” the chief executive of one large company domiciled in a country not designated as unfriendly told the publication.

Among companies of ‘unfriendly’ origin that remain active in Russia, Austrian bank Raiffeisen reported the biggest 2022 earnings in the country at USD 2 billion, according to KSE data. US groups Philip Morris and PepsiCo earned USD 775 million and USD 718 million, respectively.

The Swedish group Scania’s USD 621 million Russian profit in 2022 made it the top earner among companies that have since withdrawn from the country.

To circumvent the ban, some companies are taking unconventional steps. For example, the Russian subsidiary of Mars paid dividends to the parent group by offsetting its debt.

One source told the FT that withdrawing dividends from Russia has become as difficult as selling a business.

“Allowing dividends to be distributed has long become a kind of encouragement for ‘good behaviour’, which includes making it clear that you want to stay in Russia. One of my clients lost hope of getting any dividends out of there and just wrote it all off,” the source said.

Even some companies from ‘friendly’ countries, such as India, are struggling to repatriate their dividends.

Last month, Reuters reported that the Kremlin had stepped up pressure on companies that want to leave Russia, forcing them to sell their assets for a song.