After months of discussions over whether to confiscate Russian assets frozen in the West, G-7 nations decided in mid-June to use the future proceeds of those assets to provide a $50 billion loan to Ukraine. But that G-7 decision may leave Western companies still operating in Russia footing the bill for funding Ukraine.

Many Western businesses had pledged to leave Russia following the 2022 invasion of Ukraine but ended up remaining, as bureaucratic obstacles and the risk of potential losses increased. Some had their assets seized after announcing plans to leave. And now Russia has reacted to the G-7 decision by saying it has plenty of scope to retaliate.

“Our country has significant amounts of Western funds and property that are under Russian jurisdiction—all of this may be subject to Russian retaliatory policies and retaliatory actions,” said Maria Zakharova, a spokesperson for Russia’s Ministry of Foreign Affairs. “Of course, no one will disclose the nature of these retaliatory actions to you. But the arsenal of political and economic countermeasures is wide.”

In this situation, Western companies find themselves stuck between a rock and hard place. They have few options to exit Russia, but by remaining, they face a higher chance of losing control of their assets there. “Against this background, they look like the losers,” said Alexandra Prokopenko, a fellow at Carnegie Russia Eurasia Center in Berlin.

According to data collected by the Kyiv School of Economics and analyzed by Armin Steinbach, a nonresident fellow at the Brussels-based think tank Bruegel, European Union and U.S. companies have pulled out around 40 percent of their Russian assets since February 2022. Foreign assets worth around $194 billion are still in Russia. Of these assets, $32 billion worth are owned by U.S. companies, while $90 billion belong to European companies, the data showed.

The businesses that remained are in different situations. Some said they would leave but then backtracked or put their plans on hold. Others reduced their operations in Russia, sometimes to a minimum, while the rest are still trying to exit the country.

French industrial gas producer Air Liquide said in September 2022 that it had signed a memorandum of understanding to sell its Russian business to the local managers who were running it. The sale needs Russia’s regulatory approval, but the company told Foreign Policy that it had no update.

U.K. consumer group Reckitt announced in April 2022 that it had begun to transfer the ownership of its Russian business. This process continues, the company said. However, in an interview with the Financial Times in April, its chief executive, Kris Licht, cautioned that selling its Russian operations had become more and more complex.

Unilever, another British consumer group, said it is still reviewing its options, while Swiss food giant Nestlé said it continues to sell consumer goods in Russia but only “essential and basic foods.”

All these companies said they scaled back their operations in Russia after it attacked Ukraine. “Even with reduced operations, some are making a profit, and this may partly explain why they remained. However, slowing down the exit process, not making statements about it, can also be part of the strategy to smoothly get out of this market,” Prokopenko said.

Western sanctions have made it increasingly hard to find local buyers who are acceptable to both the seller and Russia’s authorities. In addition, Russia imposed a mandatory discount of 50 percent on assets from “unfriendly” countries sold to Russian buyers, plus a 15 percent exit tax.

The corporate exodus of around 1,000 foreign companies from Russia since its 2022 invasion of Ukraine has cost them more than $107 billion in write-downs and lost revenue, according to a Reuters analysis of company filings and statements published at the end of March.

It’s also almost impossible for Western businesses to send the profits made in Russia back to their headquarters. These funds must be held in special accounts in Russia, called C accounts. “I have spoken with dozens of foreign clients, and only two managed to repatriate this money,” said Nabi Abdullaev, a London-based partner at Control Risks, a consultancy.

Many companies are conscious of the pain inflicted on some Western businesses after their assets were seized in response to announcements of plans to leave. Yogurt producer Danone and beer-maker Carlsberg were among the most prominent victims in 2023. Danone was able to clinch a deal to sell its Russian assets but at a steep discount, while Carlsberg remains embroiled in a protracted legal battle with Moscow. Meanwhile, it has written down the value of its Russian business to zero.

More recently, when talks intensified at the G-7 level about the use of Russian assets and the United States passed the REPO for Ukrainians Act, allowing the government to confiscate Russian assets, Russia placed the Russian subsidiary of Italian water heating firm Ariston and German appliance-maker BSH Hausgeräte under the “temporary external management” of a Gazprom entity.

These measures “were taken in response to hostile actions, contrary to international law, by the United States and other foreign states that have joined them, aimed at illegally depriving Russia, its legal entities and various individuals of the right to property” in those countries, the Russian Embassy in Rome said in a statement.

G-7 nations haven’t finalized the details of how the financing of Ukraine will happen. The $50 billion multiyear loan to Ukraine agreed on in June is expected to reach Kyiv by the end of this year, with contributions from all G-7 states.

The assets would remain immobilized until Moscow ended its war against Ukraine and repaid Kyiv for the damage it caused, the G-7 said. The financing would likely take the form of a syndicated loan including multiple lenders, but the share for each participating country hasn’t been set. It will be disbursed through multiple channels to Ukraine’s military, budget, and reconstruction needs, the leaders said.

The proceeds of around $300 billion in impounded Russian funds will back the loan. The bulk of these assets are blocked in the EU—roughly 190 billion euros ($206 billion) worth of various Russian Central Bank securities and cash are held with Belgian central securities depository Euroclear. Last year, they generated a $3.5 billion net profit. Only $5 billion is held in the United States.

The much higher holdings of Russian assets in Europe and the much larger presence of European businesses in Russia make European companies more vulnerable to Moscow’s retaliation. “The relationship between Russia and the U.S. is equally hostile as between Russia and the EU, but going just by numbers, European companies are more exposed than U.S. ones,” Bruegel’s Steinbach said.

It is hard to predict if any specific corporate sector could be more at risk. Some analysts said the decision may fall on companies whose expropriation would cause little disruption to the Russian economy.

Western banks are in a particularly difficult position. Eurozone banks still involved with Russia, in particular, have come under growing pressure in recent weeks from the bloc’s supervisors, as well as U.S. authorities, over their ties to the country. The European Central Bank (ECB) has asked eurozone lenders to provide a clear road map to exit the Russian market.

U.S. Treasury Secretary Janet Yellen said in May that European banks faced growing risks operating in Russia, adding that the United States was looking at strengthening its secondary sanctions on banks found to be aiding transactions for Russia’s war effort. But for eurozone banks, especially for those running a large retail business there, the obstacles are manifold.

Last September, Italian bank Intesa Sanpaolo secured a presidential decree authorizing it to dispose of its Russian assets but still has to finalize its exit. The Russian Central Bank hasn’t given its green light, leaving the bank—which in the meantime has reduced both its cross-border and local business to residual levels—in a limbo, a person familiar with the matter said.

Cutting the exposure to Russia may also prove to be particularly challenging in the case of pool loans to Russian clients, as the other lenders, often non-European, that are part of the pool need to agree, the person said.

Italian rival UniCredit, which is the second-largest eurozone bank in Russia after Austria’s Raiffeisen, said at the beginning of July that it had reduced its Russia cross-border exposure by 91 percent and local exposure by 65 percent, with “further substantial reductions” planned. But it decided to challenge the terms set by the ECB to cut its exposure to Russia and seek a ruling from the EU’s General Court, as well as a freezing of the request in the meantime.

A complex regulatory framework involving Western sanctions against Moscow and local Russian laws led it to seek “clarity and certainty” on its obligations, UniCredit said. The ECB declined to comment.

“If the Russian state chooses to appropriate their assets, there is very little these companies could do to stop that happening,” said Marcus Fishburn from the risk consultancy S-RM. “That is the bed they have made for themselves by choosing to stay in the country, and they will have to lie in it.”