Seeking to penalize Russian president Vladimir Putin for his meddling in Ukraine this summer, the US and its European allies froze Western assets of billionaire oligarchs who are personally close to Putin.  They also barred Westerners from financing or even doing business with some of the Russian companies controlled by those oligarchs.

Recently, the lower house of the Russian parliament retaliated by passing a legislation that authorizes Putin to seize foreign assets in Russia and liquidate them to compensate Russians who have been harmed by the Western sanctions – i.e., Putin’s cronies.  Before the legislation takes effect, it has to be passed twice more by the Duma, then passed by Russia’s upper house, and finally signed into law by Putin.  So for the moment it amounts mainly to saber rattling.

But for the moment as well, those most rattled appear to be foreign investors.  Not surprisingly, foreign direct investment in Russia is slackening.  If Russia actually does start seizing Western assets and selling them off (as opposed to restricting what Russia’s oligarchs can do with their foreign assets, as the West has done), Russia will become to the world financial system what Cuba became to the US when Fidel Castro nationalized all American-owned assets on his island.

That, of course, led to decades in which the only investment Cuba could attract came from the old Soviet Union.  Perhaps Putin is counting on investment from Cuba to take up the slack.  Good luck with that Vladimir.  Of course, Putin is actually counting on investment from China, but with the slowing of that country’s economic engines, Chinese capital may be drying up as well.