How Western Firms Are Funding Russia's War in Ukraine

As Vladimir Putin continues to wage war on Ukraine, Russia is gearing up its economy even more for his war of aggression. Russia has announced that it will increase its “defense” budget by a record 25% to 13.5 trillion rubles ($140 billion) in 2025, some 40% of the state budget.

As Ukraine struggles with ongoing Russian advances amid a shortage of weapons and men, the international community must muster every resource in the fight. De-funding Russia’s war machine has long been an essential part of that. But the flow of Western money continues to fill Russian coffers more than two years after President Volodymyr Zelensky pleaded with the U.S. Congress to make sure “not a single penny” goes to Russia’s militarized budget.

There has been much talk about the corporate exodus from Russia. But the reality is that over 2,000 foreign companies continue to operate there. And the taxes that foreign companies pay in Russia could amount to as much as $20 billion annually, according to an analysis from the Kyiv School of Economics, which looked at taxes paid in 2022 and 2023. In 2022, companies headquartered in the U.S., Germany, and Switzerland were the top three foreign economic actors in Russia; in 2023, it was the U.S., Germany, and China.

These figures make clear that corporate actors are not simple bystanders in Russia but help the Russian economy to feed this war of aggression against Ukraine.

Many of the Western firms still operating in Russia are in the fast-moving consumer goods sector. They make products such as soap, chocolate, and biscuits, which they have classified as “essential goods” for the Russian population. Germany’s Ritter Sport’s CEO, Andreas Ronken, recently claimed that “Russian kids also like to eat chocolate,” which was why the company continues to operate there. Dirk Van de Put, the CEO of the U.S. multinational Mondelez, which makes Oreos, Milka, and Philadelphia cream cheese, has stated that investors do not “morally care” whether the company remains in Russia.

While that may sadly be true, Western governments should take note because it undermines their policies. The continued sale of these foreign goods also legitimizes the war in the eyes of ordinary Russians.

The corporate tax contributions from foreign businesses are not the only way money continues to be funneled into Russia. The Kremlin has raked in at least $800 billion from selling oil, gas, and coal since the full-scale invasion of Ukraine in February 2022, according to data from the Center for Research on Energy and Clean Air. More than $200 billion of that total comes from the E.U. The West has imposed tough sanctions on oil exports from Russia, but these measures did not apply to the flow of Russian pipeline or LNG gas into Europe.

There are other major carve outs. One of the most prominent ones is the so-called “refining loophole,” which gives countries such as India or Turkey a chance to refine discounted Russian crude and legally sell it to the West as diesel and gasoline.

Read More: The World Is Still Hooked on Russian Energy

Russia also enjoys the support of its authoritarian partners. China helps Russia purchase Western technology. Iran and North Korea supply ammunition and missiles, and in the case of the latter, even troops. War requires resources. With its oil and gas reserves and proven mechanisms for circumventing Western sanctions, Russia still has them.

The situation on Ukraine’s side is entirely different. Ukraine depends on the sincerity of international partners’ promises to receive money and arms.

One way to create a more reliable flow of funds would be to release Russia’s $300 billion in frozen state assets to Ukraine for its defense and reconstruction. Most of the frozen Russian assets are in Belgium. The country and its financial depository has already received more than €5 billion in levies from these frozen funds.

A finalized G7 plan announced last week to give Ukraine $50 billion of that total is encouraging. But any hope that these frozen assets could be used as leverage to force Putin to stop his war in Ukraine was crushed long ago.

The West must take bolder steps to cut off the movement of money to Russia through corporate taxes and indirect oil and gas purchases. At the same time, a more reliable source of funds must be established to support Ukraine, and frozen Russian state assets provide a clear opportunity to do this.

It is Ukrainian resistance and the actions of ordinary Ukrainians that have inspired the rest of the world to stand on the right side of history. Ukraine needs its allies to use all the weapons they have to support Ukraine and bring a swift and decisive end to Russian aggression.

Oleksandra Matviichuk is a human rights defender who works on issues in Ukraine and the OSCE region. She heads the human rights organization Center for Civil Liberties, which was awarded the 2022 Nobel Peace Prize.

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