Geopolitical Risk and Asset Valuation in Russian Energy and Mining Sectors: The Oligarch Factor

The Russian energy and mining sectors, long central to the country’s economic and geopolitical influence, now face a complex interplay of sanctions, legal disputes, and shifting investor sentiment. High-profile cases involving oligarchs like Vladimir Potanin—whose divorce battle with Natalia Potanina over a $9.4 billion stake in Nornickel has drawn international attention—highlight how personal legal entanglements can ripple into broader market stability and foreign investment dynamics. These disputes, coupled with Western sanctions, have created a landscape where asset valuation and regulatory risk are increasingly intertwined with political and legal uncertainties.

Legal Disputes as a Proxy for Systemic Risk

Potanin’s case, which hinges on UK courts determining whether his ex-wife’s claim has a “real prospect of success,” underscores the jurisdictional ambiguities and legal volatility facing Russian elites. The UK Supreme Court’s decision to remit the case to the Court of Appeal in 2025 [1] has prolonged uncertainty, a factor that foreign investors weigh heavily. Such protracted disputes signal to global markets that even high-net-worth individuals’ assets are not immune to legal and political pressures—a perception that deters capital flows.

This dynamic is not isolated. The Rusal-Nornickel shareholder dispute, where Rusal accused Potanin of favoring himself through corporate governance maneuvers [2], further illustrates how internal conflicts among oligarchs can destabilize critical industries. These cases amplify concerns about corporate governance in Russian firms, where opaque ownership structures and weak institutional checks persist. For foreign investors, the risk of entanglement in such disputes—whether through joint ventures or minority stakes—has become a significant deterrent.

Sanctions and the Shadow of Indirect Expropriation

Post-2022 sanctions have compounded these risks. While energy firms like Gazprom and Surgutneftegas remain operational due to their strategic importance, non-energy sectors—particularly those linked to oligarchs—have faced sharper declines. The U.S. Treasury’s targeting of financial technology firms and its 2025 prohibitions on petroleum services to Russia [3] have heightened fears of indirect expropriation, a tactic reminiscent of the Yukos case. Here, legal and regulatory tools are weaponized to erode asset value, as seen in the state’s push to seize shares in Uzhuralzoloto [4].

The cumulative effect is a recalibration of risk assessments. A 2025 study notes that firms connected to Putin-linked oligarchs have shown “no adverse effects” from sanctions, suggesting they leveraged pre-2022 financial buffers or state support [5]. Conversely, non-oligarchic firms face higher capital costs and reduced investment sensitivity to cash flows [5], signaling a bifurcated market where access to capital is increasingly stratified.

Market Volatility and Investor Behavior

The interplay between legal disputes and market dynamics is evident in commodity prices. When the UK sanctioned Potanin in 2024, nickel prices spiked by 6% on the London Metal Exchange [6], reflecting traders’ sensitivity to geopolitical developments. Such volatility underscores how individual legal cases can act as proxies for broader systemic risks.

Foreign direct investment (FDI) trends corroborate this. While energy sector FDI has held relatively steady due to Asia’s demand for Russian hydrocarbons [7], mining and metallurgy sectors have seen declines. The redirection of Russian oil to India and China [8] has mitigated some losses, but infrastructure bottlenecks and sanctions on critical minerals like nickel [9] have limited long-term growth. Investors now prioritize short-term liquidity over long-term equity stakes, favoring commodities over corporate equities in Russian firms.

Regulatory Perceptions and the Path Forward

Regulatory risk assessments have also shifted. The EU’s 16th sanctions package, which expanded asset freezes to 102 individuals and 65 entities [10], has reinforced perceptions of Russia as a high-risk jurisdiction. For mining firms, this means navigating not only corporate disputes but also the specter of state-led asset seizures. The U.S. designation of Gazprom Neft and Surgutneftegas under Executive Order 14024 [11] further illustrates how sanctions can blur the line between corporate and state actors, complicating due diligence for foreign investors.

In this environment, long-term investment viability hinges on two factors: the resolution of high-profile legal disputes and the evolution of sanctions. If courts like the UK’s Court of Appeal rule decisively in cases like Potanina v. Potanin, they may either stabilize or destabilize markets. A favorable ruling for Potanina could signal judicial independence, potentially easing investor concerns. Conversely, a pro-Potanin outcome might reinforce perceptions of legal systems being manipulated for political ends.

Conclusion

The Russian energy and mining sectors remain pivotal to global supply chains, but their post-sanctions trajectory is inextricably linked to the legal and political trajectories of their oligarchic stakeholders. High-profile disputes like Potanin’s are not merely personal battles; they are barometers of broader systemic risks. For foreign investors, the calculus now includes not just market fundamentals but also the likelihood of legal entanglements, regulatory overreach, and geopolitical shifts. As sanctions and legal battles continue to reshape the landscape, the sectors’ long-term viability will depend on whether Russia can reconcile its oligarchic legacy with the demands of a globalized, risk-averse capital market.

Source:
[1] Potanina v Potanin: High stakes divorce battle returns to court of appeal [https://www.glaisyers.com/potanina-v-potanin-high-stakes-divorce-battle-returns-to-court-of-appeal/]
[2] Russia's Rusal raises bar in Nornickel dispute with fresh claims against Potanin [https://www.reuters.com/markets/commodities/russias-rusal-raises-bar-nornickel-dispute-with-fresh-claims-against-potanin-2024-11-01/]
[3] Treasury Disrupts Russia's Sanctions Evasion Schemes [https://home.treasury.gov/news/press-releases/jy2785]
[4] Moscow bourse stops trading in Uzhuralzoloto after state demands ownership stake [https://energynews.oedigital.com/mining/2025/07/04/moscow-bourse-stops-trading-in-uzhuralzoloto-after-state-demands-ownership-stake]
[5] The impact of foreign sanctions on firm performance in ... [https://www.sciencedirect.com/science/article/pii/S0890838925000368]
[6] Russia, Ukraine, and the Critical Materials–Energy Nexus [https://americanaffairsjournal.org/2022/08/russia-ukraine-and-the-critical-materials-energy-nexus/]
[7] (PDF) Russia's Global Energy Role: War, Sanctions, and the Energy Transition [https://www.researchgate.net/publication/380320175_Russia's_Global_Energy_Role_War_Sanctions_and_the_Energy_Transition]
[8] As Russia Feels Effects of Multilateral Sanctions Campaign [https://home.treasury.gov/news/press-releases/jy2546]
[9] A Minefield in Russia's Energy Sector: Biden's Final ... [https://www.troutman.com/insights/a-minefield-in-russias-energy-sector-bidens-final-sanctions-act-may-be-game-changing/]
[10] Latest EU Sanctions Extend Asset Freezes, Restrict Oil Industry Dealings and Target Shadow Fleet [https://www.skadden.com/insights/publications/2025/03/latest-eu-sanctions-extend-asset-freezes-restrict-oil-industry-dealings-and-target-shadow-fleet]
[11] New U.S. and UK Sanctions, Including Related to Russia's Energy Sector [https://www.globalpolicywatch.com/2025/01/new-u-s-and-uk-sanctions-including-related-to-russias-energy-sector/]