The Case for Seizing $300 Billion in Russian State Assets
Jan 4, 2024
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Explore the feasibility and legality of seizing $300 billion Russian state assets held in Western banks. Discuss the significance of these assets amidst the Ukraine conflict. Analyze the proposal as a countermeasure to Russia's aggression and the concerns surrounding it. Examine the application of international law and its impact on the financial system. Explore potential consequences and retaliation of seizing Russian assets.
Seizing $300 billion of Russian state assets held in Western banks can help finance Ukraine's recovery and counter Russian aggression by compensating victims of their aggression.
The international law of state countermeasures allows countries to freeze and seize Russian state funds held in Western banks as compensation for Russian aggression, with the British government determining this action as legal and feasible.
Deep dives
Feasibility and legality of seizing Russian assets
Seizing Russian assets stored in Western banks has been a topic of chatter and discussion due to the ongoing conflicts with Ukraine. The center of gravity in the war is the economic viability of Ukraine, and Russia aims to wreck Ukraine's economy if they can't control it. Russia left around $300 billion in frozen assets in Western banks, which could be used to compensate victims of their aggression, primarily Ukraine. Under international law, states can take countermeasures to compensate for aggression, and this would not be a violation of normal obligations. Seizing these assets can help finance Ukraine's recovery and further its integration into the European Union, countering Russian aggression.
Money held in Western banks and international law
Money earned from selling Russian oil and gas, which is mostly in euros and dollars, is held in Western banks. The majority of these assets are the Russian state's funds, not belonging to oligarchs. The international law of state countermeasures allows countries to freeze and seize these assets as compensation for Russian aggression. Arguments regarding state immunity and disruption to the international financial system are addressed. The G7 countries acting together have control over the major currencies, and there are limited alternatives for currency holdings. While there may be political risks involved, previous actions by Russia, such as confiscating private investments and companies, have already prompted countermeasures and demands for compensation.
Potential escalatory behavior and governments' stance
Seizing Russian assets can incentivize Russia to engage in more unlawful behavior, as evidenced by their previous retaliatory measures against private companies. However, this retaliation can also lead these companies to seek compensation for damages caused by Russia's actions, further supporting the need to seize and transfer the assets. The British government has determined that this action is legal and feasible, with other governments in the G7 likely reaching the same conclusion. Though challenges and potential risks are present, the compensation for victims of Russian aggression justifies the strategic move.
In the last few days of 2023, the United States proposed that working groups from the G7 explore ways to seize $300 billion of Russian state assets. Given the news, we are re-releasing a members-only podcast with Philip Zelikow, a senior fellow at Stanford University's Hoover Institution, which was recorded and released on Dec. 19, 2023. Aaron and Philip discussed the legal grounds to seize Russian assets held in Western banks, Moscow's potential retaliatory options, and whether a seizure would be escalatory.
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