A Russian court has frozen all Volkswagen assets in Russia as the German automaker works to wind down its Russian operations.

Volkswagen, along with other foreign auto manufacturers, suspended operations in Russia last year when Western countries imposed sanctions on Moscow over the war in Ukraine.

Since then, Volkswagen has been trying to sell its Russian assets, including its Kaluga production plant, which can produce up to 225,000 vehicles a year. Volkswagen furloughed the plant in March 2022.

Russian auto manufacturer GAZ, which contracted to produce Volkswagen vehicles at its factory in Nizhny Novgorod, is behind the lawsuit. GAZ sued Volkswagen for breach of contract after the automaker terminated its production agreement with GAZ in August. The lawsuit seeks to halt any sale of the automaker’s assets in Russia.

Court filings allege Volkswagen's attempts to exit the Russian market put GAZ’ interests at risk. The company is seeking $201.3 million in damages over the terminated contract.

A Russian court has now agreed to freeze all of Volkswagen's assets in Russia while the dispute with GAZ plays out.

Czech carmaker Skoda Auto, part of the Volkswagen Group, reported last week that is is in the final stages of a deal to sell its Russian assets.

Russia mandates that companies from “unfriendly” countries, or those that have imposed sanctions on Russia, must win approval from a government commission before they can sell any Russian assets. It is feared that Russia might nationalize strategic assets over the restrictions in sales.

Other leading Western automakers have already left the Russian market. France’s Renault sold a majority stake in Avtovaz to a Russian state entity for one rouble and wrote off assets valued at $2.35 billion.

Auto production in Russia fell by 67% last year, its lowest level since the Soviet Union collapsed.