We have previously summarized some of the existing measures targeting “unfriendly” foreign investors in Russia that Moscow has taken in response to international sanctions. The more recent measures signal a further tightening of this increasingly complex web, in which more than 2,000 foreign companies present in Russia remain caught. Our summary of the latest developments follows below.

Key takeaways

• An increasing number of “unfriendly” foreign investors have had their Russian assets placed under external management. While stated to be “temporary,” the measure can be terminated only by the decision of the Russian President.
• A new decree provides for the tit-for-tat confiscation of U.S.-owned or controlled assets in Russia following any use of Russian sovereign assets by the U.S. authorities to provide assistance to Ukraine.
• The announcement by the European Union and G7 member countries of similar plans to use amounts generated by Russian sovereign assets to support Ukraine has likewise been met with threats by Moscow of further counter-sanctions.
• Meanwhile, Moscow has steadily tightened requirements for foreign investors exiting Russia, imposing additional regulatory hurdles and increasing the amount payable to the Russian budget from any disposal of assets to 15% of the assets’ market value. A mandatory 50% discount from market value has been retained.
• Additionally, the use of buy-back options has been severely restricted. Such options must generally now be exercised within two years of exit, at full market value.
• There have been changes to the regime for so-called “Type C” accounts, including to ensure that funds and securities held in such accounts remain (exclusively) available to the Russian State.
• The purported suspension by Russia of key provisions of its double taxation conventions with “unfriendly” countries has further exposed investors from these jurisdictions to increased tax burdens, including as regards dividend distributions and other income payments derived from Russia. On June 17, 2024, the U.S. Treasury Department confirmed the suspension, by mutual consent, of the relevant provisions of the 1992 U.S.-Russia double taxation convention. The suspension will take effect both for taxes withheld at the source and for other taxes on August 16, 2024.
• A prohibition on the sale of certain categories of intellectual property rights by “unfriendly” foreign parties to Russian buyers without government approval has been introduced. Payments for such transactions are to be made into a restricted “Type O” account.
• Underscoring the eye-for-an-eye nature of Russian counter-sanctions, on June 25, 2024, Russia announced that it was blocking access for dozens of European media outlets, one month after the European Council decided to suspend the broadcasting activities of four additional Russian media outlets.
• Foreign investors impacted by Russian counter-sanctions should consider whether they have recourse to international arbitration against Russia under international investment agreements.

More detail on these new measures is included in the article below.