Russia Seizes Assets from Cyprus-Based Companies as Business Owners Face Pressure Over Dual Citizenship

The Russian government has officially transferred ownership of major Russian corporations from Cyprus to Russia, following a wave of nationalizations aimed at countering Western sanctions. As part of its ongoing strategy, Moscow has introduced legislation allowing the state to seize and nationalize assets linked to individuals and businesses from countries deemed hostile. Russian President Vladimir Putin has intensified efforts to repatriate capital, forcing business owners to make a difficult choice—either relinquish their foreign citizenship or risk losing their assets.

At the same time, Russian entrepreneurs have begun returning their Cypriot passports in fear of asset seizures within Russia. Those with dual citizenship are now caught in a critical dilemma, as Moscow's new policies place significant pressure on them to align fully with Russian interests.

Putin's Warning on Western Asset Seizures

President Vladimir Putin has made it clear that the Russian government will not tolerate the freezing or confiscation of its assets by Western countries. In the summer of 2024, he issued a stern warning about Russia’s response to such actions.

"Western countries have frozen a part of Russian assets and foreign exchange reserves and are now thinking about finding some legal basis to fully appropriate them. But, despite the intrigues, theft remains theft, and it will not go unpunished," said Putin.

Pulkovo Airport in St. Petersburg

In November 2023, a decree signed by Putin transferred control of Pulkovo Airport—Russia’s second-busiest airport, located in St. Petersburg—from a Cypriot-founded company to a newly established Russian entity.

The legal basis for this action predates Russia’s invasion of Ukraine and revolves around protecting "the public interest and economic security of the Russian Federation."

Previously, the Cypriot company managing the airport was jointly owned by German firm Fraport, the Qatar Investment Authority, and Russian state-owned VTB Bank, each holding a 25% stake. The remaining shares were divided among the Russia Sovereign Fund, Mubadala, and Baring Vostok.

While the existing shareholders maintain their stakes in the newly formed Russian company, they no longer have voting rights, effectively stripping them of control.

Rolf Group Seized by Russian Authorities

In December 2023, the Russian government took control of Rolf Group, the country’s largest car dealership. The company was placed under "interim administration," a legal status used for nationalization.

Rolf Group was originally controlled through a Cypriot holding company owned by the family of Sergei Petrov. Petrov, who holds both Russian and Austrian citizenship, has been an outspoken critic of President Putin. Russian authorities justified the seizure on the grounds that Rolf Group posed a "threat to the public interest."

Makfa JSC Nationalized

March 2024 saw the nationalization of Makfa JSC, Russia’s largest pasta manufacturer. The company, valued at approximately $500 million, was previously controlled through holding structures in Cyprus and the United Kingdom.

The business was owned by former Chelyabinsk Region Governor Mikhail Yurevich and former MP Vadim Belousov. Russian authorities claimed that the company’s privatization in the 1990s had been illegal, using this as the legal basis for the takeover.

Russian Confiscation Laws

The Russian government has justified its nationalization policies through several legal arguments:

• Protection of economic security, particularly in cases where individuals hold dual citizenship.

• Importance of the business to national defense.

• Claims of illegal privatization dating back to the post-Soviet era.

These nationalization measures have extended beyond Makfa JSC and Rolf Group. Among the assets seized are Domodedovo International Airport in Moscow—previously owned by a Turkish and UAE resident—and Rodnye Polya LLC, one of Russia’s largest grain trading firms. The owner of Rodnye Polya holds dual citizenship from Saint Kitts and Nevis and resides in the UAE.

Pressuring Russian Oligarchs to Repatriate Capital

Speaking to Economy Today, economist Yannis Telonis explained that Russia has been leveraging legal frameworks to compel oligarchs with foreign assets to bring their wealth back to the country.

"This was happening before Russia's invasion of Ukraine. However, after the invasion, these pressures on the oligarchs have intensified," he noted.

Regarding Cyprus, Telonis highlighted that because a significant portion of Russian capital was previously held there, the Russian government has directly targeted two to three major business groups, using legislative measures and asset seizures to pressure them into repatriating their wealth.

The Cyprus Registrar of Companies confirmed to SIGMA that over the past year, multiple Cypriot firms with Russian ownership have relocated their headquarters to other jurisdictions, signaling an exodus of businesses previously based in the island nation.

Russians Surrender Cypriot Passports

A recent Economy Today report revealed that Russian businesspeople have begun voluntarily returning their Cypriot passports, fearing that holding foreign citizenship could lead to the nationalization of their Russian-based assets.

Earlier in February, Russian legal experts told Reuters:

"This is a signal from the Russian government to holders of dual citizenship, especially from unfriendly countries. Either you surrender your foreign citizenship or you lose your businesses in Russia."

Cyprus No Longer an Attractive Destination for Russians

According to economist Yannis Telonis, Cyprus has lost its status as a key financial and business hub for Russian investors.

"It is obvious that Cyprus is no longer a special place for the Russians, a privileged place for the Russians. As a result, we expect that other Russian funds that are exposed to this pressure will also have consequences," Telonis stated.

It is worth recalling that at the onset of the war in Ukraine, President Putin urged Russian oligarchs to repatriate their wealth, promising them "amnesty" in exchange.

As Russia continues its crackdown on foreign-held assets, the landscape for Russian business owners with international ties remains increasingly uncertain.

By fLEXI tEAM