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Russia’s Economic Chess Game: A New Strategy Puts Western Assets at Risk

In the high-stakes game of international economic relations, Russia is introducing a new, and potentially more threatening, strategy against the West. The shift comes as Moscow responds to Western sanctions, moving from restricting energy supplies to now aiming for the takeover of foreign assets within its borders, according to a leading Russia analyst.

“Russia’s economic showdown with the West, sparked by the Kremlin’s incursion into Ukraine, is entering an unsettling new phase,” the analyst cautions.

The shift in strategy came after Moscow’s legal attempts to unfreeze Russian assets in Europe proved unsuccessful. This led to the Kremlin laying the groundwork for the temporary nationalization of foreign assets within Russia, a move that potentially places billions of dollars worth of projects in jeopardy.

It is anticipated that the Russian government will adopt a “personalized approach” with each stakeholder, an effort that seems designed to sow discord among Western allies.

Central to this new retaliatory strategy is a decree signed by President Vladimir Putin last month. The decree hands over control of Western assets affected by halts to Russian operations to the government’s property management agency, which also has the power to sell these assets to Russian buyers.

The decree goes further, demanding that firms from so-called “unfriendly nations” contribute a portion of the value of sold assets, between 5% to 10%, towards Russia’s war chest. Additionally, Western companies are mandated to sell their stakes in joint ventures with Russian partners at a 50% deduction.

In the wake of the decree, the assets of energy firms from Finland and Germany have already been placed under provisional management. Combined with Western restrictions on sales to Russia, “an increasing number of these companies appear set to lose their entire investments in Russia,” warns the analyst.

However, she notes that these new constraints will be applied to companies on a case-by-case basis, influenced by their relationship with the Russian government.

“At present, neither Russia nor Europe has an all-encompassing strategy to handle these stranded assets,” she states. “The severing of ties is likely to deepen the conflict as the Kremlin seeks methods to retaliate against Europe for implementing sanctions and supporting Ukraine. Putin’s allies’ eagerness to seize Western assets in Russia will only add fuel to the fire.”

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