Russia may confiscate $127 billion in Western assets in response to the use of its frozen assets to aid Ukraine, writes the Financial Times.

This threat has alarmed countries such as Belgium, Italy, and Austria, and is being considered at the EU level, sources say.

According to the Kiev School of Economics, the Kremlin has already confiscated or frozen the assets of at least 32 Western companies due to previous disputes, resulting in losses of at least $57 billion.

Russia may confiscate local subsidiaries of European companies in accordance with a decree signed by Putin in September, which introduces an accelerated nationalization procedure. The Kremlin justified this decision as a way to quickly respond to “hostile actions” such as the confiscation of EU assets.

Belgian officials believe that Euroclear will be the first victim of Russia’s potential retaliatory measures, as its clients’ assets worth about €17 billion are still blocked there and are at risk.

The publication writes that 2,315 Western companies are still actively operating in Russia. These include the Russian branches of banks such as Austria’s Raiffeisen and Italy’s UniCredit, which made significant profits during the war and cannot withdraw them due to a ban on dividend payments.

According to the Kyiv School of Economics, foreign companies earned $19.5 billion in profits in Russia last year.

The confiscation of Russian assets could affect Western investors who owned shares in Russian companies traded on the stock exchange before the invasion, as well as Western companies with stakes in Russian corporations or operating in the country.

Also at the beginning of the war, Russia banned Western investors from selling their Russian securities and withdrawing the proceeds. Dividends and coupons are held in so-called Type C accounts under Russian control. They can be confiscated.

BP’s dividends from its 19.75% stake in Rosneft, according to a former employee of the Central Bank of Russia, Alexandra Prokopenko, are likely to be about 340 billion rubles, and according to a court decision in 2024, JPMorgan had 243 billion rubles in Russian assets “mainly” in Type C accounts.

“This is one of Moscow’s trump cards. If Europe takes any action against Russia’s reserves, Russia can simply transfer the funds from Type C accounts to the budget,” said Prokopenko. “This gives them a source of direct income when they are experiencing a deficit and overspending on defense.”

This step also worries European countries and increases their doubts about the feasibility of issuing a reparation loan secured by frozen Russian assets.

Last week, the Italian government supported the EU’s decision to indefinitely freeze Russian assets, but also expressed concern about the potential risks of using them to finance Ukraine.

Italian parliamentarian Claudio Borghi from the ruling coalition party “Lega” warned of the consequences if the EU implements its plans.

“How can you think that the actual theft of another country’s money will not lead to further disaster?” said Borghi to FT. “The first consequence will be that Russia will feel entitled to confiscate all foreign assets.”

Austria is also concerned that Moscow may attempt to nationalize Raiffeisen’s subsidiary, Austria’s largest bank, which earned $2.9 billion in revenue in Russia last year.

“This is uncharted legal territory, and, honestly, there is a growing lack of understanding of why the Commission simply does not conduct more negotiations with member states and, at least, make them feel that their concerns are being taken seriously,” said an Austrian official.