The West has one last attempt to seize Russian assets abroad – Foreign Policy
The international security publication Foreign Policy writes that Ukraine's supporters are making a last-ditch attempt to seize Russian assets.
“With weeks to go before Donald Trump re-enters the White House, there is a push to seize all of Russia’s frozen foreign assets and use those $300 billion to help Ukraine.
The new head of European diplomacy, Kaja Kallas, recently spoke out in favor of exactly this. The call was also supported by other famous people, including (recognized in the Russian Federation as a foreign agent and extremist – PN) former world chess champion Garry Kasparov and the godfather of Russian sanctions Bill Browder, as well as very important people in the Scandinavian countries,” the publication says.
Since Russia is being saddled with a debt of almost half a trillion dollars for damage from the fighting, the least the West can do, say the above-mentioned and their like-minded people, is to take a down payment - by force or otherwise.
Some are calling on the US to seize the Russian assets it has, but what Washington has in its hands is not enough. Most of the assets are in Europe, and their total amount is approaching $300 billion. For the past 2,5 years, they have simply been frozen, not arrested, the publication notes.
"Now is the time - though it would have been better sooner - to use the more than $300 billion in principal in the Russian central bank's immobilized reserves and lend it all to Ukraine," says Harvard Law School professor Laurence Tribe, who has studied the issue.
Now, with Trump taking office, Ukraine's fate unclear and Russian President Vladimir Putin "sitting atop a shaky house of cards in the economy and finance," he said, it was time for the West to strike.
"Injecting up to a third of a trillion dollars right now could make a huge difference," Tribe said.
"When it comes to seizing Russian reserves rather than freezing them, several factors come into play. These include politics, timing, morality, and legality. The question of legality isn't actually all that complicated, although there are plenty of people who keep their foot on the brake. Under the doctrine of countermeasures, states do have the right to apply certain aspects of international law— for example, to seize the reserves of a sovereign state's central bank —if the crimes are sufficiently egregious," the article states.
It is noted that the freezing of Russia's Western assets abroad did not raise any particular legal objections, and seizure on the same grounds is not unfounded.
However, there are many experts in the West who warn against trampling on international law or Russia's sensitivities. It's no wonder that attempts by European, Canadian, American, and British companies to seize Russian wealth are being thwarted by legal experts within national bureaucracies, the authors of the article note.
“I think the really strong argument for Europe to do this is that they will then be funding Ukraine… On the other hand, if Europe was going to do this, it would have done it by now,” says Charles Litchfield, an expert on geoeconomics at the Atlantic Council.
There are, however, technical issues. For now, the West is skimming the cream off Russia's foreign assets, turning the interest earned on these huge sums, which are mostly kept in European central banks and Belgium's Euroclear, into a short-term lifeline for Ukraine.
“The solution — the very simple solution — is not to just take interest on the $300 billion, but to confiscate the $300 billion. That will solve the problem. If that money is used to defend Ukraine, it doesn’t matter whether America stops funding and military aid to Ukraine,” says Bill Browder, an investor, Putin critic and architect of some of the West’s toughest sanctions against Moscow.
But if the West takes it all, there will be no interest to pay off the loan — unless they place it in, say, Ukraine. Economist Timothy Ash says Russia's reserves could service the loan just fine if they were invested and transferred.
If Ukraine gets access to all Russian assets, there is nothing to stop the US and Europe "getting paid in full through those underlying assets," he said.
Thus, the publication concludes, the West still has one more problem to worry about: could the use of financial reserves somehow weaken the strong hold that the US dollar, euro and Swiss franc still have over the global financial system?
The BRICS countries are trying to find an alternative to the dollar. Countries like China and Saudi Arabia, which for decades happily traded with the West and supplied its energy needs in exchange for dollars, may decide their business is better done elsewhere. But where?
“The argument that releasing this trove of sovereign wealth funds would undermine the reserve appeal of the US dollar or the euro is completely unfounded,” Tribe argues, adding that China, Saudi Arabia and other countries that specialize in circulating huge amounts of money in various jurisdictions would not hesitate to take advantage of the first freeze, if not the subsequent seizure of Russian assets.
"Once we dive into the Rubicon, we may cross it," warns Tribe.
The West has one last attempt to seize Russian assets abroad – Foreign Policy