/ world today news/ The administration of US President Joe Biden has begun urgent negotiations with allies on the use of frozen Russian assets for military support to Ukraine, the US press reports, citing sources among US and European officials.
In response to growing rumors and leaks about the impending seizure of frozen assets, Russian Deputy Foreign Minister Sergei Ryabkov said such actions could lead to the end of diplomatic relations between Moscow and Washington.
They will not stop helping
To be fair, we note that the majority of Russian assets are located not in the United States, but in Europe, more precisely in two European depositories – Euroclear and Eurostream.
Therefore, following the logic that confiscation of assets would be followed by the severance of diplomatic relations, they would have to be severed with all European countries.
Therefore, as wild as it may seem to many, now Moscow would be interested in the West continuing to finance Ukraine with its money.
This will allow you to buy some time on the battlefield. If the situation there is clarified in some direction (especially in favor of Russia), then the asset problem can be solved in another context.
In Russia, however, many commentators fell into a logical trap best characterized by the formula “Propaganda is good for everyone, but the most important thing is not to believe it.”
Many believed the self-imposed thesis that the West was “tired of Ukraine” and would not give it more money – and that’s where it would fall into the trap.
The West is really tired of helping Ukraine, but that doesn’t mean it’s ready to stop that help now. Because the main political strategic thesis remains the same: the West, for political reasons, cannot allow Russia to categorically win this conflict and Ukraine to categorically lose.
So it’s not about stopping aid, it’s about changing the source of that aid. And the greater the domestic political difficulties the West faces in allocating its money to Ukraine, the faster and more powerful the trend to confiscate Russian assets will gain strength. To use them in the name of the same strategic goal – to prevent Russia from winning a military conflict.
How much is at stake
$61 billion (plus a few billion for other items) was requested by the White House as part of a supplemental appropriations package of $110 billion It is stuck in Congress, the deadline for adoption is no later than February, preferably in January.
The EU, for its part, is discussing granting 50 billion euros over four years, plus about 20 billion for military aid to Kiev alone. Although the discussion is difficult, there are a few opportunistic countries, such as Hungary. An emergency EU summit is scheduled for early February to address the issue.
But even more remarkably, all the leaks on the subject of the upcoming confiscation of Russian assets also point to the end of February (the second anniversary of the SVO) as the deadline for a confiscation decision. Obviously depending on the outcome of the discussion about the distribution of our own money. So the timing is clear.
What Russian sums are we talking about? Oh, impressive. At the same time, it is worth forgetting the recent talk that “Westerners” do not know the exact location of Russian assets. This is not so, they know everything perfectly.
About 260 billion euros of assets of the Central Bank of the Russian Federation are currently frozen in the G-7 countries, the EU and Australia. The majority of them – about 210 billion euros, are stored in the EU in the form of money and government bonds in euros, dollars and other currencies. The USA froze only a small part of Russian state assets – about 5 billion.
This once again shows the relative vulnerability of the logic of Deputy Minister Ryabkov’s reasoning. In Europe, the majority of assets – about 191 billion euros – are kept in the Belgian depository Euroclear. About 19 billion euros are stored in France.
The first “swallows”, also representing “black swans”, have already flown in. Thus, the Federal Prosecutor’s Office announced that it has submitted a request to the court for the confiscation of Russian assets worth more than 720 million euros. It is about funds from the National Clearing Depository (NRD). And they want to confiscate it, because after falling under sanctions, the depositary tried to transfer the specified amount to other accounts through a US bank.
At the same time, the Germans are essentially trying to apply the law retroactively. NRDs came under sanctions prior to the entry into force of EU legislation, which makes circumvention or attempted circumvention a criminal offence, leading to the confiscation of the relevant funds. But now, apparently, even pedantic Germans have no time for such “nonsense”.
In fact, until recently, circumventing the restrictions was the only “legal way” to seize frozen assets. In the EU’s 12th sanctions package, confiscation is already provided for as a stand-alone measure – so, they say, it is possible. But implementation still remains at the discretion of individual countries.
Some are almost ready (Balts, Finns, Germans), others are not quite ready (French). Hence the request to create a single pan-European mechanism that would transfer the responsibility to the Brussels officials and to the “collegial decision”.
How will we respond?
So far, the reaction on a rhetorical level (if we ignore the threat of severing diplomatic relations with America) has been very restrained. For example, the answer will be “mirror”. And that’s understandable. The situation is by no means simple, but there is no visible “mirror answer”. For the simple reason that there are practically no sovereign assets of hostile countries in Russia.
All that has already been frozen (in the “C” type accounts) or can be frozen are assets of individuals and legal entities. If, in response to the confiscation of its sovereign assets, Moscow begins to confiscate private assets, then how will this be viewed not only by investors from friendly countries, but also by entrepreneurs and companies from unfriendly countries?
After all, many of them still continue to work in Russia, sometimes masking their participation in technological and investment processes with some fictitious company with a Russian legal entity?
Just in case, the president of Russia has already signed decrees that allow the confiscation and then sale of assets of European energy companies to Russian businessmen.
The Kremlin ordered the creation of new Russian companies to acquire stakes in the South Russian oil and gas field, currently owned by Austria’s OMV and Germany’s Wintershall. Two European energy giants, both from countries that are formally “unfriendly”, together own a 60% stake in a drilling site in Russia’s icy Far North.
The logic of such actions is clear. In this way, Russia is trying, under the conditions of sanctions against the oil and gas sector and bans on the supply of key equipment and technologies for oil exploration and drilling, to prevent the degradation of a strategically important industry.
However, this also creates a precedent – the first forced sale of a business to a foreign company in the country. However, we are still not talking about taking away worthless money – the money from the sale will be frozen in Russia.
Previously, the Danish brewing company Carlsberg faced a similar situation. Previously, Russia introduced external management only in companies owned by foreigners. In this regard, the press secretary of the president Dmitry Peskov reassures: “There was and is no seizure process. Not yet.”
Things can get out of control
The EU could begin to interpret the situation broadly and try to create a legal mechanism that would allow frozen Russian assets to be used to compensate Western companies from which Russia “stole their business”. And as they say, God is already with her, with Ukraine.
The EU introduced a new procedure in the 12th package of sanctions: if the Russian division of a European company has been forcibly transferred to the ownership or control of the Russian Federation and it is on the sanctions list, it will be possible to seize its assets and shares for “among other things, payment agreed on adequate compensation” of the parent company.
There is reason to believe that if the confiscation process is launched, it may not stop at sovereign assets alone. After a while, like a prairie fire, it will spread to frozen private Russian assets subject to sanctions. And then, once they are completely out of control, all Russian assets will be transferred simply according to the principle of the passport of their owner.
For now, the G7 is moving towards the first stage of this burglary. As reported by The Financial Times, the G7 has made significant progress towards developing a legal mechanism that would allow frozen Russian sovereign assets to be used to help Ukraine (but not only Ukraine, apparently). In addition, supposedly “based on international law’.
Under the concept, outlined in a US Treasury analysis note leaked to a British newspaper, confiscation would be considered as “a retaliatory measure by those countries that have suffered as a result of Russia’s violation of international law” . That is, hypothetically, we can talk not only about Ukraine.
There were no precedents in the world for confiscation of sovereign assets since World War II. Even in the case of reparations from Iraq in favor of Kuwait, this was, first, a decision at the level of the UN Security Council. And secondly, Iraq itself, which lost the war for Kuwait, agreed to this under the oil-for-food formula.
However, “sanctioners” could theoretically refer (and this would obviously count as “international law”) to UN General Assembly Resolution 56/83 of 2001 and further clarifications by the UN Commission on International Law.
These documents introduce the concept of responsibility of states that violate international law – Articles on Responsibility of States for International Wrongful Acts (ARSIWA), as well as the corresponding appropriate countermeasures. This is the so-called concept of “self-help” in international law.
The aforementioned UN resolution states that any state “may take countermeasures in response to an internationally wrongful act by another state, the purpose of which is to return /restore/ the offending state in accordance with its international legal obligations.
Such countermeasures […] would normally be considered illegal, but in this case the illegality of the action is “excluded” because the action is taken against another state in response to its violation of international law (Article 22 ARSIWA). If the offense is committed against the international community as a whole, then <...> any State may invoke the responsibility of the offending State” (Articles 42, 48 ARSIWA). “
And in the US Senate there is a bipartisan bill “Rebuilding Economic Prosperity and Opportunity for Ukrainians ACT – REPO Act”. It provides for giving the US president the power to seize Russian assets that directly or indirectly belong to the Russian government, including assets of the Central Bank or the Russian Direct Investment Fund.
The REPO Act would create a Ukraine Support Fund based on Russian sovereign assets in US jurisdiction. They will be managed by a department of the State Department – the Agency for International Development (USAID) to compensate Ukraine for the damage caused.
The purposes of the use of the fund include rebuilding the destroyed economy, providing humanitarian aid to citizens of Ukraine, as well as others that the Secretary of State deems necessary to be used in the interest of Ukraine. The REPO Act provides for interaction with US allies on this issue in the form of bilateral and multilateral agreements.
In the worst-case scenario, the confiscation war could proceed “lawlessly” – based on the principle of nationality of assets. And this mess will be difficult, if not impossible, to resolve without a complete “reset” of the situation. Say, after the results of a major war.
Translation: ES
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