Russia will hardly be eager to pay $50-billion (U.S.) in damages awarded on Monday by the Permanent Court of Arbitration in The Hague. But Russia is tied into the world’s commerce in manifold ways, and it will not able to simply ignore the judgement.
Nor will President Vladimir Putin’s mood be lifted by the imminent tightening of sanctions against his country by the United States, Canada and the European Union in response to his actions in Ukraine.
The arbitration decision was about the Russian state’s plundering of the oil company Yukos, of which Mikhail Khodorkovsky was once the controlling shareholder. He assembled its assets in the volatile post-Soviet era, but he disposed of his interest in Yukos in 2005 (before the Putin government jailed him; he was released last year). The successor corporation is called Rosneft; the state owns a majority of its shares.
Despite the ruling, it’s unlikely that Russia’s courts will be much help in collecting the damages. They are not independent of the Kremlin; they exist within the strange mix of business, state and organized crime that is the Russian Federation. But today’s Russia is, in many other ways, unlike the old Soviet Union. Russia’s economy isn’t behind an Iron Curtain. It is much more a part of the normal, global economy, and it has large financial assets in many countries – from which the creditors of Yukos/Rosneft and the Russian Federation itself may seek to collect part of the $50-billion.
For example, last year BP PLC exchanged its Russian assets for a 20-per-cent interest in Rosneft. Exxon Mobil Corp. has a joint venture with Rosneft in the Arctic Ocean, and Rosneft also owns 30 per cent of Exxon Mobil’s project in the Cardium Formation in the foothills of southern Alberta.
Even if Russia wanted to pay the damages promptly, $50-billion is equal to 11 per cent of the country’s foreign exchange reserves – hardly chump change. Russia’s economy is barely bigger than Canada’s. Ottawa would not find it easy to write a cheque for $50-billion. Neither will Moscow.
The total amount may never be recovered. But even as Russia seeks to go against the rules of a law-based world, in Ukraine and elsewhere, its deep interconnectedness with that wider world make it vulnerable to pressure – and creditors.