Index trend
Previous quarterly editions
Expropriation Risk: 75 75 72 75 ►Political Violence Risk:66 66 66 66 ►Terrorism Risk:60 63 66 66 ▲Exchange Transfer and Trade Sanction Risk: 73 73 63 73 ►Sovereign Default Risk:82 82 74 65 ►
Overall Risk Temperature: 70 (Medium high 1) TREND ►
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
5
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
2
Gray zone aggression has been a hallmark of Russia’s foreign policy throughout President Vladimir Putin’s rule. Its use has rapidly grown in scale after the imposition of the first Western sanctions on Russia in March 2014, in the wake of Russia’s annexation of Crimea and especially since the full-scale invasion of Ukraine in February 2022. In 2016, Russia actively meddled in the U.S. presidential election — a strategy that Moscow has since repeatedly used against other countries. According to U.S. intelligence community estimates, Russian internet trolls and bots have once again been mobilized to interfere with this year’s U.S. electoral cycle by spreading disinformation, sowing political and societal discord, and seeking to undermine support for Ukraine.
Russia has long been known for provocations directed against its Western neighbors, for example by flying military aircraft close to or briefly into their airspace; conducting nearby military drills; deploying “illegals” (spies operating without formal diplomatic cover) to recruit sources, conduct sabotage and steal classified information; using activist groups on the state’s payroll to harass foreign diplomats; imposing punitive trade restrictions; and moving tactical nuclear weapons to Belarus.
However, it should be noted that Russia’s hybrid warfare is not limited to either its immediate neighborhood or more distant members of the European Union (EU) or NATO. In July, the last remaining U.S. troops left Air Base 101 in Niger, in the context of Russia’s increased backing of its ruling military junta. Similarly, Russia has been actively undermining Western influence throughout the Sahel region of Africa, which has included sending in military advisors and close protection operatives to prop up local elites, extending preferential loans, supplying weapons and helping to develop mineral resources.
TREND ▲
Since the invasion of Ukraine in February 2022, over 1,000 foreign brands have withdrawn from the Russian market, both voluntarily and under pressure from sanctions. In response, Russian authorities began to create obstacles for future withdrawals.
All limited liability companies owned by non-residents from “unfriendly nations” are prohibited from disposing of their stakes in banks and energy firms without prior governmental authorization. The sale of Russia-based assets by such non-residents is contingent on a 50% or higher discount to the fair market value of the assets and the payment of an exit tax.
In April 2023, Putin ordered the Russian assets of Germany’s Uniper and Finland’s Fortum to be placed under “temporary administration.” This was largely seen both inside and outside Russia as de facto nationalization. The move was justified by the earlier government takeover of Gazprom and Rosneft assets in Germany, officially in the name of energy security. In July, Putin ordered similar measures against France’s Danone and Denmark’s Carlsberg. In May 2024, Danone was authorized to sell its Russian business to a preapproved Russian investor.
The risk of outright expropriation of Russian assets remains high for all companies headquartered in any of the “unfriendly” jurisdictions.
TREND ►
The Russian invasion initially led to a wave of anti-war protests, resulting in the arrests of more than 12,000 people between the launch of the military campaign and March 13, 2022, when the protest movement fizzled amid a severe crackdown. On March 4, 2022, Putin signed into law a bill criminalizing the spreading of “fake news” about the war and the Russian armed forces, with a maximum penalty of 15 years of imprisonment.
The authorities were somewhat taken by surprise in mid-January 2024 when several thousand people took to the streets in the southeastern territory of Bashkortostan to protest the arrest of a civil society activist who had been leading opposition to a local mining project. Detentions and criminal prosecutions ended the protest abruptly. Overall, the intensity of protest activity nationwide will remain low so long as the Putin regime keeps a firm grip on the sprawling security apparatus.
The government has continued to expand its foreign agents list, designating both natural and legal persons for allegedly receiving funding from abroad. Moscow has also launched a head-on assault on domestic opposition and Western media, including social media. For instance, both Facebook and Instagram have been banned, with their owner Meta having been designated an extremist organization.
On March 22, a group of heavily armed terrorists rampaged through the Crocus City Hall in the Moscow suburb of Krasnogorsk. The concert hall, the largest in Moscow Oblast, was set on fire and quickly burned down. In total, over 140 people died and more than 550 were injured. The attack, which was claimed by the Islamic State group, became the second-deadliest in Russian contemporary history, only the 2004 attack on a school in Beslan having had more casualties. Despite a lack of evidence, Putin has blamed Ukraine, and the Russian security services have since repeatedly validated this apparently false lead. An official investigation is ongoing.
There have been regular acts of sabotage and guerrilla warfare in the European part of Russia and the Crimea. On July 17, 2023, the Kerch Strait bridge was damaged by a Ukrainian seaborne drone, following previous damage in a major explosion in October 2022. This is in addition to the shelling of the neighboring Russian regions by the armed forces of Ukraine and recurring sorties into the same territories by the anti-regime, Kyiv-backed Russian Volunteer Corps. Since early August, parts of Kursk Oblast have been occupied by the Ukrainian military.
The invasion of Ukraine has led to the imposition of unprecedented economic sanctions on Russia. This includes multi-jurisdictional freezes of the central bank’s overseas assets, restrictions on sovereign debt trading and bans on the sale of certain currencies to Russia.
Faced with an impending liquidity crisis, the authorities have enacted drastic capital controls. They froze (as of March 2022, last renewed until March 9, 2025) withdrawals from foreign currency bank accounts above a $10,000 limit, prohibited the transfer of foreign currency exceeding regularly updated thresholds, and allowed both sovereign and corporate debt to be paid in rubles. Since March 2022, the government has been collecting revenue from the sale of natural gas by Gazprom in Europe in rubles only.
Other Western restrictions include the disconnection of a dozen Russian banks — including the largest, Sberbank, and second largest, VTB — from the SWIFT messaging system; U.S., EU and U.K. asset freezes on Alfa Bank, the largest private bank; and an ever-expanding range of export controls, especially in relation to military technology and dual-use goods that Russia could use for its weapons programs.
TREND ▼
Since February 2022, the U.K., EU, U.S., Canada and Japan have frozen the Russian central bank’s foreign currency reserves held within their jurisdictions. Russia’s finance ministry estimates that some $300 billion has been immobilized out of the-then total of $634 billion.
These freezes, in addition to the U.S., EU and U.K. prohibitions on the transfer of U.S. dollars, euros and U.K. pounds to Russia, prompted Putin to install stringent capital controls and to allow paying down both sovereign and corporate debts in rubles.
Although all three key credit rating agencies (Standard & Poor’s, Fitch and Moody’s) withdrew their Russia ratings in March – April 2022 because of Western sanctions, Moody’s declared Russia to be in default on its foreign-currency sovereign debt on June 27, 2022, for the first time since 1918.
