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Russian Profit Lockdown: Western Companies Struggle to Access Billions in Profits

In the wake of Moscow's full-scale invasion of Ukraine, Western companies that have continued to operate in Russia find themselves in a challenging predicament. Despite generating billions of dollars in profits, they are unable to access these funds due to Kremlin-imposed restrictions aimed at increasing pressure on "unfriendly" nations.

Russian Profit Lockdown: Western Companies Struggle to Access Billions in Profits

According to data compiled by the Kyiv School of Economics (KSE), overseas companies reported $20 billion in profits from Russia in 2022, of which $18 billion came from groups representing nations deemed "unfriendly" by Russia. These companies also accounted for a significant portion of the $217 billion in Russian gross revenue reported by overseas firms during the same period.


KSE's Deputy Development Director, Andrii Onopriienko, noted that these figures might have grown substantially since then. However, precise assessments are challenging because most international businesses operating in Russia only disclose their local financial results annually.


"The figures may have grown considerably since then, although it is not possible to assess exactly how much since most international businesses operating in Russia only disclose their local results annually," said KSE deputy development director Andrii Onopriienko, who compiled the data.


The restrictions in question involve a dividend payout ban on businesses from countries designated as "unfriendly" by Russia. This ban, which includes the United States, the United Kingdom, and all EU member states, has effectively locked away earnings in Russia. "Tens of billions in dollar terms are stuck in Russia," said the chief executive of one large company domiciled in a country not designated as unfriendly. "And there is no way to get them out."

As a result, tens of billions of dollars in profits are currently inaccessible in Russia, leaving international companies grappling with the dilemma of what to do with their operations in the isolated nation.


Many foreign businesses have been attempting to sell their Russian subsidiaries, but such deals require Moscow's approval and often involve significant price discounts. Recent announcements from companies like British American Tobacco and Volvo reveal agreements to transfer their Russian assets to local owners.


Among companies originating from "unfriendly" nations that continue to operate in Russia, Austrian bank Raiffeisen reported the highest earnings in 2022, totaling $2 billion, according to KSE data. U.S.-based Philip Morris and PepsiCo reported profits of $775 million and $718 million, respectively. Swedish truckmaker Scania secured the top spot among companies that have withdrawn from Russia, with a 2022 profit of $621 million.


"While Raiffeisen, the largest western lender operating in Russia, has said it 'does not have access' to its profits in the country, it has not written off the value of the business," the report states. "Philip Morris declined to comment. PepsiCo and Scania did not respond to requests for comment."


U.S.-based businesses collectively generated the highest total profit of $4.9 billion, followed by German, Austrian, and Swiss companies with $2.4 billion, $1.9 billion, and $1 billion, respectively.

These inaccessible funds add to the costs faced by international businesses due to the fallout from Russia's invasion of Ukraine. European companies alone reported losses and writedowns worth at least €100 billion from their Russian operations since the invasion.


Russian officials have yet to outline a clear strategy for dealing with these frozen assets. However, experts suggest that foreign entities may seek to leverage these frozen dividends to urge Western authorities to unfreeze Russian assets.


Despite some companies finding ways to navigate the restrictions, the situation underscores the complexities faced by Western businesses operating in Russia and highlights the broader impact of geopolitical tensions on the global business landscape.

By fLEXI tEAM



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