On March 9, a committee in the Russian Duma approved a law that would allow the Russian government to nationalize the property of foreign firms that have exited or ceased operations inside the country since it invaded Ukraine. This follows calls from prominent Russian leaders, including former president Dmitry Medvedev and United Russia General Council Secretary Andrei Turchak, to punish these firms. The law has yet to move forward in the Duma, but the mere threat of such a step will probably harm Russia’s economy for years to come.

Sanctions can hurt an economy, but they can be revoked. Reputation, on the other hand, is not so easily repaired. Vladimir Putin has spent years working to distinguish modern Russia from its czarist and Soviet predecessors, and he is well aware of the costs associated with proposing nationalization as a wartime policy. His willingness to jettison what could have been one of his most important legacies to pursue a war in Ukraine suggests that the last few months represent a marked turn in Putin’s goals and his vision of Russia’s place in the world.

In the late 19th and early 20th centuries, the czarist regime established a favorable reputation with foreign lenders. The czar’s firm control over the economy, which included the power to revoke corporate charters at any time, made direct investment in the Russian economy risky. But the Romanov Dynasty’s 300-year reign and control over roughly one-sixth of the Earth’s land made the regime appear to be a reliable debtor. Lured by high interest rates and often encouraged by glowing articles written by journalists secretly bribed by the Russian government, foreign investors lent a staggering amount of money to the czarist government in its last decades in power.

Foreign investors’ confidence in Russia’s economic stability remained high even as the czar’s regime grew frail. At the outbreak of World War I, 1.6 million French citizens held czarist-backed securities worth 4.5 percent of France’s national wealth. During the war, American and British firms invested more in the czarist government to ensure that their ally could maintain an eastern front in the war. In 1916, even as large American firms, such as International Harvester and Singer Manufacturing, found themselves subject to strict state controls on repatriating their Russian profits, New York City Bank floated $75 million in dollar-backed Russian treasury bonds on American markets.

The czar’s fall from power in March 1917 and the subsequent rise of Vladimir Lenin and the Bolshevik Party the following November, therefore, came as quite a shock to those with a financial stake in the country.

In January 1918 — in a move that staggered global markets and would haunt foreign investment in Russia for decades to come — the Bolsheviks put their communist ideology into practice by nationalizing all foreign-owned property and repudiating all foreign debt accumulated by their predecessors. When the Bolsheviks emerged victorious from the Russian Civil War in 1921, they solidified themselves not only as the government of the former Russian Empire, but as a pariah in the global economy.