The risks of “symmetrical” confiscation of Russian and Western assets are named

Expert Maslennikov: “The measure will increase the fragmentation of the global economy”

In the event of confiscation of the frozen reserves of the Russian Central Bank, the West risks suffering “symmetrical” losses. We are talking about $288 billion – this is the volume of direct investment in the economy of the Russian Federation by the European Union, G7, Australia and Switzerland at the end of 2022. At the same time, taking into account the ban on the withdrawal of funds from the country by unfriendly non-residents, the amount could have increased significantly due to transfer to type “C” accounts. Experts consider it unlikely that the West and Moscow will take extreme measures. That is, there will be no confiscations – on either side.

Let us recall that after the start of the special operation in Ukraine, the European Union and the G7 countries blocked almost half of Russian foreign exchange reserves amounting to about €300 billion. About €200 billion is in the EU, mainly in the accounts of the Belgian Euroclear, one of the world’s largest settlement and clearing systems. In October 2022, the EU leadership instructed the European Commission to prepare proposals for using these funds to finance reconstruction work in Ukraine, but we have still not heard anything from the EC.

According to the latest available data, Cyprus invested $98.3 billion in the Russian economy, the Netherlands – $50.1 billion, Germany – $17.3 billion, France – $16.6 billion, Italy – $12.9 billion. Neutral Switzerland invested $28 .5 billion, the UK – $18.9 billion (according to information as of the end of 2021), the USA – $9.6 (according to information as of the end of 2022), and Japan – $4.6 billion.

The issue of confiscation of Russian assets in favor of Kyiv has been discussed in the West virtually since the first days of the special operation. To date, a certain precarious balance has been established there between supporters and opponents of the measure. That is, the situation is stalemate. Recently, Reuters pointed out global financial risks, citing the concerns of a number of high-ranking Western officials. According to them, this step will harm the interests of the world’s central banks, since the assets of the Russian Federation are invested in government bonds denominated in euros, dollars and British pounds.

In December, Russian Finance Minister Anton Siluanov warned of a likely “symmetrical” response from Moscow, recalling that the country has more than enough frozen European assets in “C” accounts. These include dividend obligations to counterparties from unfriendly states. The so-called “C” type accounts were introduced by decision of the Board of Directors of the Central Bank with one purpose – to prevent the withdrawal of funds and assets from Russia by residents of unfriendly countries. But how realistic is the stated amount of $288 billion?

“$288 billion is the total amount of Western direct investment, these are the production assets of non-residents located on the territory of the Russian Federation,” explains Nikita Maslennikov, leading expert at the Center for Political Technologies. “As for type C accounts, according to the most general estimates, about $6-7 billion have been accumulated there. In particular, we are talking about frozen dividend payments on shares, coupons on corporate and government bonds.”

The main problem, according to Maslennikov, is the lack of clarity: it is not clear what specific Western assets – state, corporate or private (non-residents who invested in federal loan bonds) we will appropriate for ourselves as a retaliatory measure. This poses very serious risks. Let’s say they confiscated the reserves of our Central Bank (that is, the state), we, in turn, confiscated the assets of foreign businesses for an equivalent amount. This will not only dramatically increase overall geopolitical tensions, but will also lead to even greater fragmentation of the global economy. So far, only one thing is clear: Moscow will not pay Western companies that have left the Russian Federation for the production infrastructure they once created on Russian territory. That is, the invested money will not be returned to former investors.

“Indeed, today at least $288 billion of assets of Western countries are under Russian jurisdiction,” says Artem Deev, head of the analytical department at AMarkets. – Taking into account the fact that these are data for the end of 2022, the amount may be even higher due to interest. The funds are placed in type “C” accounts, which are prohibited from withdrawal by residents of unfriendly countries. In the event of confiscation of Russian assets, our country may well respond symmetrically in order to cover its costs. However, it is unlikely that it will come to that. The West, and above all, the EU, are unlikely to decide to take such a step, realizing that this will undermine confidence in European banks and the integrity of the entire global banking system in its current form.”

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