Page 18 - Russia OUTLOOK 2024

a crucial year during which the West cannot seriously increase its support yet, stockpiles of weapons are running low and new production is yet to come online, while key Western governments are distracted by other crises and domestic politics.
Seizing Russia’s frozen $300bn CBR money
Towards the end of December as it became clear that Western financial aid for Ukraine was drying up, Western countries, including the US, began to actively consider the prospect of seizing Russian central bank’s frozen $300bn of reserves as an alternative way of funding Kyiv.
The proposal, gaining traction among G7 countries, aims for a consensus to seize these assets. However, France, Germany and Italy are a lot more cautious and have created hurdles to a decision to seize the assets.
The alternative is to seize the profits that the frozen assets held by Euroclear in the form of bonds earn – about €3bn a year – which is legally easier to do.
Approximately €260bn of Moscow's central bank assets were immobilised last year in G7 countries, the EU and Australia, with the EU holding the majority at €210bn. Euroclear holds around €191bn, while France has immobilised €19bn, and Germany holds approximately €210mn. Another €7.8bn is in Switzerland and only €4.6bn in the USA.
Although Washington hasn't publicly endorsed asset confiscation, discussions within G7 are led by the US, which is advocating the seizure as a "countermeasure" under international law to induce Russia to end its aggression against Ukraine. The US officials propose disbursing the seized assets to Ukraine through institutions like the World Bank or the European Bank for Reconstruction and Development (EBRD) as a form of pre-payment of eventual reparations that will be imposed on Russia.
Confiscating Russian sovereign assets poses legal challenges, as central bank assets are protected under customary international law. Advocates argue that such a move can be justified as an equitable remedy to push Russia to compensate Ukraine for war damages. Philip Zelikow, a former senior US diplomat, draws a parallel to compensation imposed after the 1990 Iraqi invasion of Kuwait.
However, legal experts like Ingrid Brunk told the FT she is against this idea, as countermeasures are not meant for obtaining compensation but to make a wrongful state comply with its existing obligations. No reparations have yet been imposed on Russia, which will not agree to them anyway. She deems the idea "unwise" and warns of the potential repercussions on the global financial system, as seizing nominally immune sovereign assets will undermine Europe’s rule of law and property rights, and thus the trust in the euro and the entire Western banking system.
Other proponents of the idea, including Lord Cameron, the UK foreign secretary, downplay these worries, highlighting that confidence has already been undermined simply due to the freezing of the assets, even if they
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