Russian countersanctions: New measures targeting foreign investors in Russia

Published Date
May 11, 2023
Fourteen months into the Ukraine war, the Russian Government has introduced new countersanctions targeting foreign investors in Russia. The latest measures require businesses from “unfriendly” countries to make a “voluntary contribution” to the Russian State budget in case of asset divestments, and expose such businesses to the risk of having their management replaced with a Government-appointed administrator. Russia has additionally announced a one-off windfall tax on corporate profits, also impacting foreign businesses - including those still in the process of exiting the country.

Key takeaways

  • The latest measures signal an increasingly antagonistic attitude toward foreign businesses from “unfriendly” countries remaining in Russia.
  • New rules require all “unfriendly” investors to make a “voluntary contribution” to the Russian State budget amounting to at least 10% of the proceeds from the sale of any asset located in Russia.
  • A Presidential Decree designed to “protect Russian property and national interests” has also been enacted, allowing the State to place assets of “unfriendly” investors under external management. While the administration is stated to be “temporary,” under the terms of the Decree, it can be terminated only by decision of the Russian President.
  • The Russian Government has additionally announced plans to impose a one-off windfall tax on both Russian and foreign businesses, to be fixed at between 5% and 10% of excess profits in the 2021–2022 period as against 2018–2019.
  • The Russian President has moreover signalled a further tightening of the rules for dividend payments to “unfriendly” investors.
  • Foreign investors impacted by the latest measures should consider whether they may have recourse to international arbitration against Russia under international investment agreements.



In response to the international network of sanctions imposed against Russia following the February 2022 invasion of Ukraine, the Russian Government published a list of “unfriendly” foreign States.1 The list includes the EU Member States, the UK, the U.S. and other States with a Russian sanctions program. Nationals from these countries are subject to an increasingly complex web of retaliatory countersanctions, impacting a variety of business and financial transactions with a Russian nexus. 

The latest countersanctions, discussed below, specifically target companies from “unfriendly” States with Russian assets. While the Russian invasion of Ukraine spurred an exodus of foreign businesses from Russia, some have remained—either voluntarily, or owing to legal or regulatory barriers in exiting the Russian market. The recent measures signal a progressively more hostile attitude toward such businesses.

Russian countersanctions broadly apply to any company “associated with” an “unfriendly” State, including where the company:

  • Is registered in such a State;
  • Has its principal place of business in such a State;
  • Derives its primary source of profits from such a State; or
  • Is under the control of foreign natural or legal persons from such a State.


A general exemption is made for companies ultimately controlled by (i.e., whose ultimate beneficial owners are) the Russian State or Russian natural or legal persons.2

The measures also come at a time when the Russian Government is looking for ways to address its widening budget deficit, as the costs of the war in Ukraine and Western sanctions continue to mount.3 In this context, the Government has additionally announced a planned new windfall tax on corporate profits, also discussed below, with further impacts for foreign businesses.

Latest measures

Obligatory Payment to State Budget for “Unfriendly” Investors Exiting Russia

Existing rules

In March 2022, the Russian Government introduced new rules making a variety of financial and real estate transactions between Russian persons and citizens of “unfriendly” States or companies “associated with” such States subject to the prior approval of the Government Commission on Monitoring Foreign Investments in Russia (the “Commission”).4

This regime was subsequently expanded by Presidential Decrees Nos. 618 and 737 introduced in September and October 2022, respectively, stipulating that all “unfriendly” foreign investors wishing to transfer (directly or indirectly) shares in Russian entities must first obtain a permit from the Commission.5

Under a further set of rules introduced in December 2022,6 in order to obtain a permit from the Commission:

  • Investors must submit an independent asset valuation report.
  • The sale price must be no more than 50% of the appraised market value.
  • Investors are required to defer payment from the sale for 1–2 years or else make a “voluntary contribution” to the State budget of 10% of the discounted sale price.


New rules

Under the latest rules, which were published on the website of the Russian Ministry of Finance on March 27, 2023,7 the option of deferring payment of the asset sale purchase price is no longer available. Rather, all asset sales will now incur a “voluntary contribution” to the Russian State budget amounting to at least 10% of either:

  • Half the appraised market value of the assets; or
  • The total appraised market value of the assets, if the assets are sold at a discount of more than 90%.


Additionally, investors must submit, along with the independent asset valuation report, an opinion of a Government-approved appraisal expert.

Transactions that fail to comply with all the above requirements will likely render a transaction null and void, and may additionally incur administrative penalties.

Special rules for strategic companies and companies in the financial and energy sectors

Special rules continue to govern share transfers involving strategic companies as well as companies in the financial or energy sectors, pursuant to Presidential Decree No. 520 of August 5, 2022.8 This Decree prohibits any such transaction unless approved by the Russian President, effectively amounting to a ban on divestments. The Decree’s initial expiration date of December 31, 2022 was subsequently extended by one year, to December 31, 2023.9

The Decree contained a carveout for the Sakhalin-2 oil and gas project. This project was the subject of a July 1, 2022 Presidential Decree (No. 416),10 pursuant to which all foreign stakes in the project were transferred to a new Russian entity. Russia’s Gazprom holds (through a subsidiary) the controlling stake in this new entity. While Japan’s Mitsui and Mitsubishi retained their stakes (12.5% and 10%, respectively) in keeping with the terms of the Decree,11 the UK and Netherlands-based Shell announced its intention to divest its stake (27.5% minus one share). On April 11, 2023, the Russian Government announced that it had approved the sale of Shell’s stake to the Russian entity Novatek for a price of USD 1.21 billion.12

Temporary administration of property of certain “unfriendly” companies in Russia

Key provisions

On April 25, 2023, Putin enacted Presidential Decree No. 302,13 establishing a basis for placing Russian property owned or controlled by investors “associated with” an “unfriendly” State under Government administration.

The Decree is stated to apply (i) in case of threats to Russia’s national security, or (ii) in the event that Russia or Russian persons are deprived of the right to ownership of property abroad by way of “actions contrary to international law” - a seeming reference to calls to seize frozen Russian assets to pay for Ukraine’s reconstruction.

Property to be placed under administration is identified in a list attached to the Decree, and may extend to moveable and immovable property, securities, shares or stock in Russian corporations, and other property rights. Responsibility for managing assets is vested in Russia’s Federal Agency for State Property Management, Rosimushchestvo. While stated to be “temporary,” the administration can be terminated only by decision of the Russian President. The costs of the administration are to be paid for out of income generated by the property in question. The Decree does not, however, specify what is to happen with any remaining profits.

List of affected property

The initial list of property under administration comprises that of:

  • Finland’s majority State-owned Fortum Oyj, including a 69.8807% stake held by Fortum Russia B.V. and a 28.3488% stake owned by Fortum Holding B.V. in Russian energy company PAO Fortum. Fortum’s Russian assets comprise seven thermal power plants and, with joint venture partners, a portfolio of wind and solar plants.
  • Germany’s recently nationalized Uniper SE, which owns an 83.73% stake in Russian energy company Unipro. Unipro operates five power plants in Russia.


In March 2022, Fortum announced a halt to all new investment projects in Russia and all new financing to its Russian subsidiaries.14 This was followed in May 2022 by an announcement that it was pursuing a controlled exit from the Russian market.15 The total book value of Fortum’s Russian holdings on December 31, 2022 was EUR 1.7 billion.16

Uniper had advised the Russian Government of its intention to sell its Unipro stake in 2021, and a contract with a local buyer was signed in September 2022.17 Approval for the sale, however, is still pending.18 In balance sheet terms, Unipro had been deconsolidated and essentially written off since the end of 2022.19

Possible expansion of the list

The list of property to be placed under external management can be expanded at any time. The present inclusions, Fortum and Uniper, appear to be specific acts of retaliation:

  • On April 20, 2023, Germany’s lower house of parliament, the Bundestag, approved amendments to the German Energy Security Law allowing for the sale of a stake held by Russia’s Rosneft in a German oil refinery, without the need for prior nationalization. The stake had been placed under the trusteeship of the German industry regulator in September 2022.20
  • On April 4, 2023, Finland joined NATO, in a move strongly opposed by Russia.
  • On March 17, 2023, it was announced that Germany had triggered the denial of benefits provision of the Energy Charter Treaty with respect to legal entities owned or controlled by Russian interests, as well as Russian investments.21
  • A State-owned Finnish energy company, Gasum, and Uniper had both recently launched arbitrations against Russia’s Gazprom.22 Gazprom has previously threatened Russian retaliation for pursuing claims against it in arbitration.23


Notably, since the enactment of Decree No. 302, the Governor of the Russian Central Bank has spoken up against any potential extension of the Decree to foreign banks’ Russian divisions.24 A number of foreign banks continue to operate in Russia through local subsidiaries.25

Changes to rules on dividend payments to “unfriendly” investors

On May 2, 2023, it was announced that President Putin had ordered the Russian Government to “clarify” the procedure for Russian companies to make dividend payments to shareholders from “unfriendly” countries.26

According to reports, going forward, dividend eligibility is to be conditioned on expansion of production in Russia, development of new technologies, and investment in the Russian economy.27

Dividend payments to “unfriendly” investors are already subject to restrictions, including that distributions exceeding RUB 10 million (approximately USD 130,000) per calendar month be made in Russian rubles to a special account.28 Further, pursuant to rules introduced earlier this year, distributions will be approved only where, among other requirements:

  • The amount does not exceed 50% of the company’s net profits for the previous year.
  • Recipients have demonstrated a willingness to continue to do business in Russia.
  • The company’s activities contribute to Russia’s “technological and industrial sovereignty” or socio-economic development.29


New windfall tax

Amendments to the Russian Tax Code imposing a one-off windfall tax on business are expected to come into force as of January 1, 2024.

The planned levy would apply to all Russian businesses, including Russian subsidiaries of foreign enterprises.30 Contemplated exemptions include those for oil companies and oil refineries, coal companies, LNG producers and SMEs.31 Consolidated groups of companies will be treated as a single entity and required to pay once on behalf of all group members.32

Under the draft bill, for 2024 payments the rate would be fixed at 10% on excess profits made in 2021–2022 compared with 2018–2019.33 This rate could be reduced to 5% for payments received before November 30, 2023.34

It has been reported that foreign businesses seeking to leave the country may have any amount paid under the new tax regime taken into account in negotiating the price of exit,35 although this has not been confirmed.

Final perspectives

The most recent measures will concern all businesses that remain in Russia. For those yet to make a complete exit, the measures will make the process of withdrawing from the country more costly and cumbersome.

According to reports, more than 2,000 applications by foreign companies seeking permission to exit the Russian market are currently pending.36 This suggests that the scope of the revised rules regarding asset divestments and the planned windfall tax, in particular, is wide. Whether the list of foreign companies subject to Government administration will be expanded, however, remains to be seen. As noted above, for the moment, the present inclusions appear to be targeted retaliatory moves.

Foreign investors impacted by Russian countersanctions may have recourse to international arbitration against Russia, either under contractual agreements with the State or under an international investment agreement to which the State is a party. Russia notably has more than 60 bilateral investment treaties (BITs) in force, including with many States now designated by Russia to be “unfriendly.”37 Investors may also enjoy treaty protection through a subsidiary situated in a State that has a BIT with Russia.

For energy-related investments made prior to October 19, 2009, there is a further possibility of international arbitration under the Energy Charter Treaty (ECT), to which a number of “unfriendly” States are notably also a party.38 The ECT’s application to Russia is contested, however, due to the fact that Russia signed but never ratified the treaty. A prominent ECT claim against Russia in which the ECT’s application to Russia was ultimately upheld is that brought the former majority shareholders of Yukos.39

Many existing Russian countersanctions—including restrictions on the ability of foreign investors and their local subsidiaries to transfer immovable property, shares or foreign currency-denominated funds—may in some cases constitute a breach of substantive treaty protections, such as the protection against unlawful expropriation, the guarantee of fair and equitable treatment, or the guarantee of free transfer of investments and investment returns.

The latest measures pose even more heightened risks for investors. While Decree No. 302 provides for “temporary” administration of foreign investors’ property, even de jure temporary measures can be expropriatory. Arbitral tribunals notably have found the appointment by the State of a temporary manager to be tantamount to an expropriation.40 A significant delay in approving applications to exit Russia - according to one report, it may take eight years for the State to process all currently pending requests41 or an arbitrary refusal of such an application may also provide the basis of a treaty claim. In certain circumstances, measures imposing undue financial burdens on investors in the form of “windfall taxes” may likewise give rise to claims for treaty compensation.

Any arbitral award secured against Russia would be binding and enforceable under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which Russia is a party. Given the need to involve national courts in this process, recovery in Russia is highly unlikely to be feasible. Rather, successful investors would likely have to attempt to enforce their award in other countries where Russia has assets—including assets held through State-owned entities. Often, State assets used for commercial (and not for diplomatic or other official State) purposes can be enforced against. In the case of frozen State assets, careful attention would have to be given to the applicable sanctions regime, and authorization to release the assets obtained from the relevant national authorities.

Further information

We are tracking developments as they relate to Russian countersanctions and may provide further updates as this highly fluid situation evolves.

Our Global Sanctions and International Arbitration teams would be pleased to answer any questions or to provide further analysis.


1. Russian Government Directive No. 430-r of March 5, 2022 (as amended by Russian Government Directive No. 2018-r of July 23, 2022 and Russian Government Directive No. 3216-r of October 29, 2022.
2. Official Explanations of the Ministry of Finance of the Russian Federation No. 1 on the Application of the Decree of the President of the Russian Federation No. 618 of September 8, 2022.
3. Reuters, Russia swings to $29 bln first-quarter budget deficit, April 7, 2023.
4. Resolution of the Government of the Russian Federation No. 295 “On the Approval of the Rules for Issuing Permits by the Government Commission for Control over Foreign Investments in the Russian Federation for Transactions (Operations) to Be Conducted (Executed) by Residents with Foreign Persons for the Purpose of Implementing Additional Temporary Economic Measures to Ensure the Financial Stability of the Russian Federation” of March 6, 2022.
5.Presidential Decree No. 618 “On the Special Procedure for the Implementation (Execution) of Certain Types of Transactions (Operations) between Certain Persons” of September 8, 2022 (applicable to shares in Russian Limited Liability Companies); Presidential Decree No. 737 “On Certain Issues of Implementation (Execution) of Certain Types of Transactions (Operations)” of October 15, 2022 (applicable to shares in Russian Joint Stock Companies).
6. Ministry of Finance of the Russian Federation, Extract from Minutes of Meeting of the Subcommittee of the Government Commission on Monitoring Foreign Investments in Russia dated December 22, 2022, No. 118/1.
7. Ministry of Finance of the Russian Federation, Extract from Minutes of Meeting of the Subcommittee of the Government Commission on Monitoring Foreign Investments in Russia dated March 2, 2023, No. 143/4.
8. Presidential Decree No. 520 “On the Application of Special Economic Measures in the Financial and Fuel and Energy Sectors in Connection with the Unfriendly Actions of Certain Foreign States and International Organizations” of August 5, 2022.
9. Presidential Decree No. 876 “On Amendments to the Decree of the President of the Russian Federation No/ 520 dated August 5, 2022” of December 5, 2022.
10. Presidential Decree No. 416 “On the Application of Special Economic Measures in the Fuel and Energy Sector in Connection with the Unfriendly Actions of Certain Foreign States and International Organizations” of June 30, 2022.
11.See Government of the Russian Federation Resolution No. 2442-r of August 26, 2022 (Mitsui); Government of the Russian Federation Resolution No. 2474-r of August 31, 2022 (Mitsubishi).
12.Government of the Russian Federation Resolution No. 890-4 of April 11, 2023.
13. Presidential Decree No. 302 “On the Temporary Administration of Certain Property” of April 25, 2023.
14. Fortum Website, Fortum in Russia,
15. Fortum Website, Fortum in Russia,
16. Fortum, Stock Exchange Release, Inside information: Russia has issued a new presidential decree with implications on Fortum’s assets, April 26, 2023.
17. Uniper, Press Release, Russia places Unipro under state administration, April 26, 2023.
18. Uniper, Press Release, Russia places Unipro under state administration, April 26, 2023.
19. Uniper, Press Release, Russia places Unipro under state administration, April 26, 2023.
20. Reuters, German parliament approves law to speed Rosneft’s exit from Schwedt refinery, April 20, 2023.
21. Energy Charter Secretariat, Press Release, March 17, 2023.
22. Gasum, Press Release, Gasum takes its natural gas supply contract to arbitration, May 17, 2022Gasum, Press Release, Gasum to continue negotiations regarding natural gas supply contract after a decision from the arbitral tribunal, November 16, 2022Uniper, Press Release, Uniper initiates arbitration proceedings against Gazprom and further ringfences Russian business unit, November 30, 2022.
23. Interfax, Gazprom warns Naftogaz lawsuit could result in sanctions ban on transactions on part of Russia, September 27, 2022.
24. Reuters, Russia should not take temporary control of foreign banks’ units, central-bank governor says, April 28, 2023.
25. Reuters, Russia should not take temporary control of foreign banks’ units, central-bank governor says, April 28, 2023.
26. Reuters, Putin orders Russian government to clarify rules on dividend payments to ‘unfriendly’ investors, May 2, 2023.
27. Reuters, Putin orders Russian government to clarify rules on dividend payments to ‘unfriendly’ investors, May 2, 2023.
28. Presidential Decree No. 95 “On the Temporary Procedure for Fulfilling Obligations to Certain Foreign Investors” of March 5, 2022Presidential Decree No. 254, “On the Temporary Procedure for the Fulfilment of Financial Obligations in the Field of Corporate Relations to Certain Foreign Investors” of May 4, 2022.
29. Ministry of Finance of the Russian Federation, Extract from Minutes of Meeting of the Subcommittee of the Government Commission on Monitoring Foreign Investments in Russia dated December 22, 2022, No. 118/1.
30. Interfax, Windfall tax – Siluanov, April 28, 2023.
31. Interfax, Windfall tax – Siluanov, April 28, 2023.
32. Interfax, Windfall tax – Siluanov, April 28, 2023.
33. Interfax, Windfall tax – Siluanov, April 28, 2023.
34. Interfax, Windfall tax – Siluanov, April 28, 2023.
35. Bloomberg, Cashing Out of Russia Will Come With New Tax on Foreign Business, April 20, 2023.
36. Financial Times, Western groups leaving Russia face obligatory donation to Moscow, March 27, 2023.
37. Including: Albania; Austria; Belgium; Bulgaria; Canada; Czech Republic; Denmark; Finland; France; Germany; Greece; Hungary; Italy; Japan; Lithuania; Luxembourg; Netherlands; North Macedonia; Norway; Romania; Singapore; Slovakia; South Korea; Spain; Switzerland; Ukraine; and the UK.
38. Including: Albania; Austria; Belgium; Bulgaria; Croatia; Cyprus; Czech Republic; Denmark (withdrawal pending); Estonia; Finland; France (until December 8, 2023, plus a 20-year sunset period; Germany (until December 21, 2023, plus a 20-year sunset period; Greece; Hungary; Iceland; Ireland; Italy (until January 1, 2016 plus a 20-year sunset period); Japan; Latvia; Liechtenstein; Lithuania; Luxembourg (withdrawal pending); Malta; Montenegro; Netherlands (withdrawal pending); North Macedonia; Norway; Poland (until December 29, 2023, plus a 20-year sunset period); Portugal; Romania; Slovakia; Slovenia (withdrawal pending); Spain (withdrawal pending); Switzerland; Ukraine; and the UK.
39. Shearman & Sterling LLP, Historical Award in the Yukos Majority Shareholders Arbitration, July 28, 2014. On November 5, 2021, the Dutch Supreme Court dismissed Russia’s arguments relating to provisional application of the ECT, while remanding the case to a lower court for further consideration of one unrelated ground of appeal.
40. See e.g. Payne v. Iran, Award No. 245-335-2, August 8, 1986Sedco, Inc. v. National Iranian Oil Company, Award No. ITL 55-129-3, September 17, 1985Tippetts et al. v. TAMS-AFFA Consulting Engineers of Iran, Award No. 141-7-2, June 19, 1984Starrett Housing Corporation v. Iran, Interlocutory Award No. ITL 32-24-1, December 19, 1983.
41. Ukrainska Pravda, About 2,000 companies want to leave Russia, it takes 8 years to consider their applications, April 18, 2023, citing Kyiv School of Economics (KSE) figures.