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| The West has so far frozen about $300 billion in assets of the Russian Central Bank. (Source: Shutterstock) |
Like other central banks, the Russian Central Bank moves part of its gold and foreign exchange reserves into liquid assets such as major currencies, gold and government bonds. About half of those reserves are held in the West.
The bank confirmed that about $300 billion in overseas assets have been frozen.
Western efforts hit a wall
Of the frozen assets, 210 billion euros ($232 billion) of Russian reserves are believed to be in the EU and 7.8 billion euros in Switzerland. The US is believed to have frozen about $5 billion in Russian state assets.
In July 2027, the EU's clearing house Euroclear revealed that of the 2.28 billion euros earned in the first half of this year, more than 1.7 billion euros were profits from frozen Russian assets.
Since Moscow launched a special military operation in Ukraine, about 5 million Russian private investors have had their accounts in international financial institutions frozen. As of July 2023, the value of frozen securities in the portfolios of private investors amounted to $3.4 billion.
Western nations have been mulling for months how to seize the money and send aid to Kiev. The 27-member bloc has also repeatedly discussed imposing a windfall tax on profits generated from the fixed funds, which would generate an estimated €3 billion in profits.
The EU aims to raise 15 billion euros for Ukraine from the proceeds of frozen Russian assets. But some member states are opposed to the idea.
Recently, the Financial Times quoted informed sources as saying that France, Germany and Italy are still “extremely cautious” about this idea and some EU officials “worry about possible retaliation” if Russian assets are seized.
Next February, leaders of the Group of Seven (G7) industrialized nations are expected to discuss plans to allow the seizure of frozen assets from Moscow.
It is unclear what the G7 leaders intend to use the assets for, but the West has considered seizing frozen Russian assets to help rebuild Ukraine after the military campaign. However, there have been concerns about the legality of seizing such frozen assets.
Some policymakers say Moscow's use of assets could undermine the international financial system, eroding confidence in the dollar and euro as reserve currencies.
Professor Robert Shiller from Yale University (USA), a Nobel Prize winner in Economics, said: "If the US does this (confiscate and use assets) to Russia today, Moscow can do it to any country tomorrow. That will destroy the 'security halo' surrounding the USD and will be the first stage of the de-dollarization process."
On the US side, anonymous US and European officials told the New York Times that the Biden administration is “quietly signaling new support” to receive a huge sum of about $300 billion.
Some officials in the world's largest economy have expressed concern that such a drastic move would undermine the country's reputation as a major financial center.
The New York Times also pointed out three challenges that the G7 could face if it decided to confiscate this asset.
First, many are concerned about whether the seized assets will be sent directly to Kiev or whether they could be used for the benefit of these countries in other ways.
Second, if this money is sent to Ukraine, will it serve as a budget for the country's post-conflict recovery or will it continue to be military aid?
Third , the seizure of state assets on such a large scale is unprecedented in history. The G7 will have to carefully consider the scenario of Moscow's retaliation, including launching international lawsuits and applying a similar policy to the assets of "unfriendly" countries frozen by Russia.
How did Russia react?
Russian officials have repeatedly warned that Western seizures of Russian assets go against all principles of the free market.
"Let's see how they (the West) decide to protect private property - something that has made their reputation for centuries," an official told Reuters .
In late December 2023, Kremlin spokesman Dmitry Peskov said: "The illegal seizure of many of our assets is a frequent topic of discussion both in Europe and the United States. This is unacceptable and could cause serious harm to the global financial system.
Moscow reserves the right to use legal tools, both domestic and international, to respond to anyone who intends to use frozen Russian assets to aid Ukraine."
If someone confiscates something of ours, we will consider retaliation, Dmitry Peskov added.
No final decision has been made yet. The West continues to discuss whether the seized Russian money will be sent directly to Ukraine or used in other ways to help Kiev, despite Moscow’s objections.
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