Investment disputes in the crossfire of War - Part III: the new wave of nationalisations

In the series “Investment Disputes in the Crossfire of War”, economists from Compass Lexecon’s International Arbitration practice discuss challenges arising in the valuation of damages amidst Russian geopolitical shifts.

Following the earlier articles – which presented a high-level taxonomy of Russian countersanctions since 2022 and focused on regulations targeting cross-border operations – this third article reviews measures that resulted in the effective nationalisation of assets in Russia. With foreign-owned assets across multiple industries affected and several international arbitrations currently underway, these measures may add an additional layer of complexity to quantum assessments. Economists Julian Delamer and Vladimir Tsimaylo [1] provide their insights.

The views expressed in this article are the views of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees or its clients.

Introduction

Over the last four years, Russian authorities have pursued the largest nationalisation drive since 1917, with the pace accelerating each year. The identified book value of nationalised assets now exceeds an estimated RUB 3.9 trillion (over US$48 billion). The mechanisms for nationalisation have also evolved, moving beyond national security justifications to include asset-specific interventions and wide-ranging countersanctions.

While most nationalisation cases to date concern domestic investors – sometimes characterised as a generational “wealth redistribution” – several foreign-owned assets have also been affected. As a result, a handful of international arbitrations against Russia have come to light, predominantly in the energy industry. Many companies from “unfriendly” jurisdictions continue operating in Russia and are therefore exposed to further waves of nationalisation; these include large corporates in energy, banking, FMCG, and industrials, with assets worth billions of dollars.

This article reviews the latest data on the scale of Russia’s “new wave” of nationalisations and its legal bases. We then highlight specific examples of affected foreign-owned businesses and the complex circumstances around their operations. Building on the lessons for quantum experts set out in Part I (“Insights from Crimean Arbitrations”) and Part II (“The Impact of Russian Countersanctions on Value”), we consider how alternative legal instructions on the imminence of measures, scope of affected investments and alternative asset use may affect the damages assessment.

The scale of the "new wave" of nationalisations in Russia

Throughout the 2010s there were just six motions for asset nationalisation in Russia, including the reversal of a previous privatisation of an oil major and several bailouts of troubled banks.[2] Since 2022 the number of cases has exceeded 100, covering more than 400 companies with an identified book value of RUB 3.9 trillion. The pace and scale have accelerated: the number and estimated value of nationalised companies has roughly doubled each year, reaching 157 companies worth at least RUB 1.1 trillion in 2024, a figure likely to be exceeded in 2025.[3]

Trends are also visible in the types of assets and their owners. In terms of asset class, authorities have shifted from targeting strategically important industries, such as defence suppliers and energy players, toward more liquid assets such as food manufacturers, real estate, and land.

In terms of types of owners, authorities have been increasingly targeting owners residing abroad – Russian emigrants, dual nationals, and foreigners.[4] Once nationalised, assets do not always remain with the state (or state-controlled entities). Some are sold or transferred to a new class of buyers seeking a once-in-a-lifetime opportunity – sometimes described as “privatisation 2.0”.[5] This is exacerbated by a smaller pool of buyers with access to financing, given sanctions risk and Russia’s continued exclusion from international capital markets.

Figure 1 summarises the results of continuous research by Russian law firm NSP and indicates that most assets were nationalised under legislation protecting investments of strategic importance to national security – primarily critical infrastructure and the procurement of essential goods and services. The largest single asset reportedly nationalised on these grounds was Moscow’s Domodedovo airport, owned by Russian nationals through a network of offshore companies.[6] Another example is Raven Russia’s warehouse portfolio, nationalised (and now put up for sale) even after disposal by the parent company, Raven Property Group (formerly London-listed).[7] The legal bases for nationalisation include anti-corruption legislation, protection of the public interest, and alleged irregularities in prior privatisations.

Figure 1: Reported book value of assets nationalised 2022 – July 2025, grouped by reason (RUB billion)

^{Source: Authors’ analysis based on the research by NSP.[8]}

Measures targeting foreign-owned assets

Security concerns aside, Russia’s approach to foreign-owned assets has been relatively cautious and largely retaliatory. Some companies were nationalised “to protect the public interest” – for failure to meet obligations to consumers, workers, or suppliers, whether or not they attempted to boycott Russia. For instance, a Schlumberger plant producing explosives for drilling and blasting was nationalised after investment ceased and shipments of products and technology were halted.[9]

Businesses controlled by Ukrainian nationals or by alleged supporters of the Ukrainian armed forces have been nationalised on the basis of purported links to “extremists and terrorists”. These reportedly include the confectionery business of former Ukrainian President Petro Poroshenko; energy, real estate, and agricultural assets of Ihor Kolomoisky; alcohol plants of a consortium selling “Stolichnaya” vodka; and 50% of Russia’s largest choux pastry manufacturer, reportedly controlled by a Latvian citizen.[10]

Separately, several foreign-owned assets (not included in Figure 1) have been arrested, frozen, or placed under temporary administration as part of Russia’s reaction to actions by “unfriendly” countries. For instance, the temporary administration of Uniper and Fortum was imposed shortly after a Leipzig court rejected Rosneft’s appeal against Germany’s decision to place its German assets under regulatory control.[11] The nationalisation push has also been linked to Russia’s search for leverage regarding more than US$300 billion of frozen sovereign assets held in Europe, as asset-swap proposals to date suggest full recovery is unlikely.[12] These actions therefore typically fall within a broader set of Russian countermeasures to Western sanctions.

In Part II of the series we outlined the countersanctions framework established by the 2018 Federal Law “On Measures (Countermeasures) in Response to the Unfriendly Actions of the USA and/or Other Foreign States”.[13] Several subsequent measures targeted equity deals and asset ownership.

First, following EU restrictions on goods for the aviation industry in Russia, in March 2022 Resolution No. 311 by the Government of Russia banned the export of aircraft and aircraft equipment.[14] As a result, 147 aircraft and 16 engines worth over $4.5 billion, leased to Russian airlines, were stranded in Russia. A recent judgment of the High Court of Justice confirmed the loss of assets and concluded that the lessors were entitled to recover the losses from the war-risks insurers despite the EU and US sanctions.[15]

The second affected group included various joint ventures registered abroad that were “repatriated” on the basis of Presidential Decrees No. 416, 943 and 965, complementing the 2018 Federal Law on Countersanctions:

• The first two targets were oil and gas development projects in Russia’s Far East, “Sakhalin-1” and “Sakhalin-2”. Each had an offshore-based operating company backed by international investors under production sharing agreements signed in the 1990s with Russia. Under two Presidential Decrees in June and October 2022, the ownership of the projects was transferred to newly formed Russian entities retaining the original allocation of shares.[16] ExxonMobil and Shell, who were the original shareholders in the respective projects, objected to the transfer and decided against applying for shares in the new companies.
• In December 2022 another Presidential Decree banned Gazprom from purchasing gas supplied from JVs with OMV and Wintershall Dea.[17] A year later, both companies were stripped of their stakes in the gas-field exploration JVs, which were re-registered in Russia.[18]
• A similar approach was taken under standalone Presidential Decree No. 909 dated 30 November 2023: a new Russian holding replaced a Cypriot entity that owned a PPP concession until 2040 for Pulkovo Airport in Saint Petersburg, the country’s second largest. While German and Qatari investors retained ownership in the new entity, their voting rights were transferred to a new management company and all foreign-law debt liabilities were terminated.[19]

In parallel, Presidential Decree No. 520 of August 2022 imposed an overall ban on transactions with shares (or participation interests) in strategic enterprises and certain financial institutions and energy companies owned or controlled by entities connected to “unfriendly” states.[20] In practice, it effectively made it impossible to acquire or dispose of ownership in energy or banking assets without the permission of the Russian president.

The combination of Western sanctions with Decree No. 520, which locked in the assets of financial institutions from “unfriendly” countries, eventually resulted in multiple seizures of banking assets and years-long court battles:

• Following the US and UK sanctions imposed in February 2022, JP Morgan closed the account of the Russian state bank VTB, which was unable to withdraw the net balance (the size of which is disputed by the parties). This prompted VTB to secure the freezing of JP Morgan’s assets in Russia totalling US$439.5 million.[21]
• Similarly, Goldman Sachs terminated derivative agreements with the sanctioned Russian bank Otkritie, which resulted in the freezing of its assets in the country.[22]
• Furthermore, Russian courts allowed Gazprom’s joint venture RusChemAlliance to seize more than €700 million in assets held by UniCredit, Deutsche Bank, and Commerzbank to recover sums it was allegedly owed under performance bonds issued for a suspended gas plant construction project.[23]

In April 2023, Presidential Decree No. 302 allowed the Russian government to place certain assets owned or controlled by individuals or entities from “unfriendly” countries under temporary state management.[24] In theory, the mechanism of transferring property to temporary state management does not deprive owners of their rights of ownership, as the temporary manager cannot alienate the assets. In practice, however, several businesses were subsequently sold, voluntarily or otherwise, with only Ariston’s assets released from temporary management.[25] In Carlsberg’s case, for instance, shortly after its assets were placed under temporary management, its local subsidiary obtained a court ruling allowing it to continue using its trademarks.[26]

The list of assets and foreign investors affected by this Decree has been growing ever since, as we summarise in Table 1 below.

Table 1: Condensed list of shares and assets put under temporary management since 2023 according to Presidential Decree No. 302 (as of October 2025)

^{Source: Authors’ analysis of presidential decrees amending Presidential Decree No. 302. [27][28][29][30][31][32][33]}

In May 2024, Presidential Decree No. 442 established an additional mechanism to seize the assets of US persons within Russian territory. It was introduced in response to the United States’ “Rebuilding Economic Prosperity and Opportunity for Ukrainians Act” (the “REPO Act”) of April 2024, which created a framework for the seizure of Russian sovereign assets in the US and their transfer to a “Ukraine Support Fund.”[34]

Quantum implications from adopting an alternative valuation premise

Public information on nationalisations, voluntary sales, and other exits by foreign owners is limited, and information on ongoing disputes is similarly scarce. According to existing sources, a handful of investor-state arbitrations for treaty breaches have been threatened or initiated by ExxonMobil,[35] OMV,[36] Wintershall Dea,[37] Carlsberg,[38] and Fortum.[39]

The quantum challenges discussed in Parts I and II of the series – such as the rapidly evolving macroeconomic landscape and investors’ expectations, restricted public data and the loss of track records, complex factual backgrounds, and multiple possible counterfactual scenarios – remain relevant for the damages assessment in existing and potential future nationalisation cases. There are, however, special considerations specific to the latest Russian nationalisation wave, due to an additional layer of uncertainty regarding the longevity of measures, remaining links between the nationalised assets and their owners, and going concern risks unrelated to nationalisation.

Some assets may represent an option for value in the future

As explained in the previous section, Russia’s approach to nationalising foreign-owned assets has sometimes been cautious, with many assets being held “under temporary management” and with at least one example (Ariston) of a nationalisation decision being reversed, as shown in Table 1. Investors who managed to sell their assets but were unable to repatriate the proceeds are in a similar position.

From an economic perspective, even if such assets contemporaneously do not provide any monetary value to their foreign owners, they remain valuable as they provide their owners with an option to receive the accumulated profits and/or the operating assets in the future, whenever the various applicable measures are lifted. The value of such an option can be quantified with a range of financial valuation techniques which allow quantum experts to simulate multiple possible developments and estimate a potential range of the asset’s value.

No matter the exact valuation technique used – be it scenario analysis, decision trees or Monte Carlo simulations – the critical assumptions will be the expectation of possible outcomes, the probability of occurrence for each possible outcome, and the time horizon for such outcomes. For instance, one can estimate the probability of sanctions against Russia being lifted (which may prompt Russia to ease the countersanctions) over various time horizons. History tells us, however, that nationwide sanction regimes have historically lasted from as little as 1 year to as long as 75 years (as seen in Table 2 below), meaning that estimating the precise expected duration for the current sanctions regime on Russia may be challenging. However, a properly crafted financial valuation model will allow the user to test different hypotheses, and ultimately aid the Tribunal in its decision-making process.

Table 2: Selected sample of recent sanctions regimes

The quantum and nature of the claimed damages may flow from different financial impacts

The imprecision of certain decrees and the incoherence of their application mean that the impact of the measures may affect only a portion of the investment. For instance, Decree No. 302 allows the Russian authorities to nationalise specific movable and immovable properties, equity shares and ownership rights. The damage suffered by the investors, however, may be greater or lower than the standalone value of impacted assets.

For multinationals in particular, the value of the Russian entity often depended on intra-group synergies created by shared management, IP, technologies or supply chains. For instance, ExxonMobil’s investments in the LNG projects in the Far East relied on the development of unique and cutting-edge drilling technologies.

Equally, certain Russian assets could have contributed unique value to the portfolio they were part of, such as the nationalised pharmaceutical producer Nizhpharm which had been part of German company Stada Arzneimittel AG and manufactured dozens of products for exports. This means that before the war broke out, the total value of a portfolio of international assets exceeded the sum of the value of its individual components, given the synergistic value created.

In such cases, it is critical to assess if the loss of synergistic value has a direct causal link with the claimed measures. For example, if there was a loss of synergies after 2022 due to the impact of sanctions (e.g., a reduction of profitability due to unavailability of Western software in the Russian entity), the value of the nationalised assets may have been (at least partially) reduced by events with no causal link to the claimed measures. However, one must evaluate the Russian entities’ ability to mitigate the immediate effect of the lost synergies in the long term (e.g., Russian industries’ ability to adapt in the new geopolitical environment of isolation).

Linked to the value of synergies is an issue of lost asset title versus lost economic control. If an investor retains its shareholding, but voting rights or management control are suspended, the claim could be focused on the valuation of a so-called “control premium” (similar to minority discounts). If access to dividends is temporarily restricted, then the quantum of damages may be linked to reduction in value due to liquidity constraints.

In sum, depending on the scope of protected and affected investments, as well as the selected basis of valuation (e.g., fair market value focuses on the standalone investment, whereas investment value allows one to factor in synergies with other assets), the damages assessment may differ from a typical asset valuation.

It may be more appropriate to value certain assets on a liquidation basis

Even absent nationalisation measures, the operations of foreign-owned assets were affected by rapidly unfolding events – the war, sanctions, countersanctions, and the volatile macroeconomic landscape – meaning that the contemporaneous value of the assets did not necessarily reflect the “business as usual” value. As shown in the previous sections, Russia relied on a variety of reasons for nationalising businesses, including owners’ alleged failures to perform obligations, whether as the result of deliberate management decisions to wind down businesses or external circumstances.

• For instance, the revenues of packaging company Silgan – which owned two plants producing a total of around 350 million metal and aluminium cans annually – declined sharply between 2022 and 2023, turning a profitable business into a loss-making one. Its market share had fallen from 15% in 2021 to 0% by the time it was placed under temporary management in 2023.[40] The precise reasons for this underperformance, however, are not publicly known.
• Similarly, ExxonMobil could not continue operating the Sakhalin-1 project whilst attempting to exit its assets reportedly worth around US$4 billion.[41] Specifically, as a result of Western sanctions, Russian tankers transporting the oil seemingly lost their insurance cover, which eventually led to a halt in oil and gas production and prompted Exxon’s subsidiary to declare force majeure, effectively ending its role as operator.[42] As Sakhalin-1 also supplied gas to the local population, social commitments were cited as a rationale for establishing a locally registered operator that was able to secure domestic insurance and resume production.[43]

Assessing the value of a business on a liquidation premise is typically appropriate if the business is no longer considered a going concern, and there is no meaningful probability of it returning to going concern status. In practice, this means valuing the business as the sum of the realisable value of its assets, net of associated liabilities, transportation costs, sales commissions, and other transaction expenses. Intangible assets (such as intellectual property, licences, brands and goodwill), which in certain industries can be of considerable book value, oftentimes have little or no liquidation value.

For the valuation of damages in the context of Russian nationalisations, conducting an assessment on a liquidation basis poses both familiar and novel challenges for the quantum expert, which often involves:

• presenting evidence that the going concern assumption was unrealistic (unless otherwise instructed);
• identifying tangible assets, and assessing their condition and alienability;
• assessing the recovery (discount) rate from book or fair market value;
• benchmarking costs related to sale preparation, liquidator’s fees, shipping or transportation;
• identifying the appropriate marketing period, distinguishing between orderly and fire sales;
• assessing the waterfall of the liquidation proceeds by accounting for outstanding liabilities in the appropriate order of priority;
• addressing any potential additional discount linked to the seller’s status as an investor from an “unfriendly” jurisdiction; and
• assessing the potential impact of other countersanctions, such as measures restricting the transferability of financial securities and foreign currency.[44]

While in our experience it is not uncommon for damages valuation experts to adopt a liquidation premise, it rarely appears in published awards. It was, however, reportedly chosen by claimants in a number of arbitrations before the Iran-US Claims Tribunal, established in the 1980s to resolve disputes concerning the freezing of Iranian assets by the US following the 1979 hostage crisis. Notably, the liquidation assumption was used to determine compensation for expropriation not only for businesses that were not going concerns, but also where the claimant had not requested valuation on a going concern basis, although no distressed discounts were applied.[45]

Conclusion

For disputes arising from Russia’s new wave of nationalisations, the quantum debate will not turn solely on macroeconomics and sanctions mechanics, but also on the legal framework and relevant fact patterns, including the specific measures, scope of affected investments and the premise of value: was the impact permanent and was the affected asset a going concern with an option value and further synergies, or was liquidation the only realistic path? In addition to legal instructions, answering these questions requires granular evidence on the causality and timing of the measures’ impact as well as asset’s operational feasibility and alienability – often under severe data constraints. In our experience, oftentimes the most robust assessments will triangulate valuation approaches, clearly justify the chosen premise, and transparently bridge from legal assumptions to financial outcomes.

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