Economist Maslennikov called a catch in the West’s new plan to confiscate Russian assets

“Issuing bonds against funds that are not your property is nonsense.”

A new chapter is being written for the saga invented by the collective West called “the confiscation of frozen assets of the Russian Federation.” G7 countries are planning to issue debt to finance Ukraine, using Russian sovereign reserves as collateral. According to the Financial Times, Kyiv’s allies will demand that Moscow repay the debt on these securities, and if they refuse, they will begin to seize the frozen funds and transfer them to the Ukrainian side. According to Russian experts, this measure contradicts international law, including Anglo-Saxon law.

According to anonymous FT interlocutors, such a plan would allow the G7 to raise funds for Ukraine without the need to immediately resolve legal issues. It would provide “some liquidity to Ukrainians based on the coalition’s already made promise that Russia would pay.” In general, a story as old as time from the category of “they got me married without me.” I wonder why on earth “Russia will pay”? It turns out that the West gave Kyiv some kind of almost one hundred percent guarantee based on its own unproven conclusions – either about Russia’s pliability, or about its own creativity. This is strange!

Let us recall that after the start of the special operation, the European Union and the G7 states blocked €260 billion ($280 billion) belonging to the Russian Federation in the form of both cash and securities. Of this amount, about €191 billion ($207 billion) are in the EU, mainly in the accounts of Belgium’s Euroclear. At the end of October 2023, this international depository, one of the largest in the world, reported that in nine months of the year it had earned over €3 billion in interest on investing in sanctioned Russian assets. It was decided to keep this money in special accounts until the EU countries unanimously agree to send it to help Ukraine. Earlier, Belgian Prime Minister Alexander de Croo announced the creation of a “Fund for Ukraine” of €1.7 billion, which is planned to be replenished by introducing a windfall tax (income tax) from blocked reserves.

Meanwhile, these amounts (€3 billion and €1.7 billion) are not comparable with the total volume of blocked assets of €260 billion. The ambitious, outwardly clever idea of ​​​​issuing debt obligations (belonging, by the way, to the same Belgium) concerns precisely this main figure. But the question is: how feasible is it, and what will be the consequences?

“The decision is kind of confusing, dumb,” says Nikita Maslennikov, a leading expert at the Center for Political Technologies. – On the one hand, it is dictated by the technical and legal impossibility of confiscating Russian assets directly and transferring them to Ukraine. On the other hand, the West needs to do something. Under any circumstances, issuing bonds against funds that are not your property is nonsense. Yes, the money is frozen, but it does not belong to you. The scheme is extremely controversial and vulnerable even from the point of view of current Anglo-Saxon law. Accordingly, the Russian Federation will remain in its previous position: any transactions with blocked assets are illegal, and we are not going to recognize them.”

Ultimately, we are talking specifically about the forced seizure and seizure of funds in favor of Kyiv; The definition of “collateral” is not appropriate here. It would be a different matter if Russia itself (as the owner) managed this money, pawning it, relatively speaking, for foreign investment. According to Maslennikov, the new G7 plan indicates that continued direct financing of Ukraine is becoming an increasingly unbearable burden for the West. It is also unclear who will buy the issued bonds if Russia refuses (which there is no doubt about). The decision to confiscate its assets would set a dangerous precedent where foreign funds could be arbitrarily expropriated under any pretext. For example, how will China, which is a very large, second after Japan, holder of American debt, react to such arbitrariness? Hardly positive…

“US Treasury Secretary Janet Yellen constantly points out all these points,” notes Maslennikov. – Back in 2014-2015, the agency opposed the idea of ​​confiscating Russian assets, and in the end it managed to restrain then-President Barack Obama from such a step. Today the risks are much higher, as is the degree of confrontation. The consequences are unpredictable, but it seems that the G7 decision will accelerate the process of defragmentation of the global economy, which is already underway. The world’s central banks will also suffer damage, since the assets of the Russian Federation are invested in government bonds denominated in euros, dollars and British pounds.”