Russia Warns It Will Seize U.S. Assets in Retaliation to U.S. Courts Enforcing $50 Billion Ruling by The Hague
Russia has threatened to retaliate against any attempts by U.S. authorities to seize Russian assets (stemming from a $50 billion ruling by an arbitration court in The Hague) with asset seizures of its own targeting U.S. property in the country. According to reports, Russia would be targeting, not only property of the U.S. government, but also the property of “its citizens and legal entities.” As noted previously, this dispute is rooted in an arbitration ruling in The Hague that awarded $50 billion in damages to the former shareholders of Yukos, which the court ruled had been unlawfully dismantled by Moscow. The award has triggered a potentially escalatory sequence of events between Russia and the West, as the decision has equipped these shareholders with the right to pursue remedial action through the judicial systems of cooperative states.
The latest Russian threat was in response to a communication from the U.S. State Department, which reportedly gave Russia until August 21 to reply or object to such a lawsuit that was brought by the former Yukos shareholders in the District of Columbia. The communication (and its possible aftermath) has the potential to alter the risk calculations of companies doing business in Russia, including U.S. companies, due to the possibility of being targeted by these threatened retaliatory measures. It could also influence the risk calculations of Russian entities doing business abroad.
As written previously, due to the nature of this enforcement exercise and its success being largely dependent on technical interpretations of the law by local and regional judiciaries — rather than on the diplomatic or political preferences of national leadership — these decisions by the courts (in response to the ruling in The Hague) have the potential to become a major point of contention (the beginnings of which are already in evidence). Interestingly, thus far, asset seizures have only targeted those belonging directly to the Russian state, although most technical experts believe this is merely a matter of officials initially focusing on “low-hanging fruit.”
Those assets that are majority owned by Russian state-owned enterprises are susceptible to similar treatment and are legally fair game. If they are targeted directly, it would likely increase the probability of Russia fulfilling its threat to target even private property belonging to “entities” emanating from those states seizing Russian assets.