Russian central bank governor: Western seizure of frozen assets won’t affect Russia’s financial stability

05/02/2024 / By Richard Brown

Central Bank of Russia Gov. Elvira Nabiullina in a statement assured people that Russia would remain financially stable even if the United States and its allies were to seize its frozen assets overseas.

The U.S. and its allies have frozen approximately $300 billion worth of assets belonging to the Russian central bank as part of sanctions related to Russia’s special military operation in Ukraine, with most of these assets held in the European Union.

Recently, President Joe Biden signed a bill permitting the White House to seize roughly $6 billion in Russian state assets held in American banks. (Related: Switzerland confirms it holds $14.3 billion in FROZEN Russian assets.)

Nabiullina stated at a news conference that the potential confiscation of gold and foreign exchange reserves would not impact the country’s financial stability, as Russia ceased operations with these assets long ago and does not utilize them.

She highlighted the Russian central bank’s efforts to diversify its foreign exchange reserves over the years and emphasized that current operations involve reserves unaffected by sanctions, mitigating any potential risks to the country’s financial stability.

While the White House advocates for confiscating the funds to support Ukraine’s war efforts against Russia, EU lawmakers and Group of 7 finance chiefs have expressed concerns about the legal implications of asset seizure.

EU nations, holding the majority of frozen Russian funds, fear that expropriation could lead to investment outflows and destabilize the euro.

Nabiullina previously cautioned that seizing profits from frozen Russian funds, as well as the assets themselves, would diminish the appeal of the euro and the dollar as reserve currencies in international markets.

Moscow has condemned the seizure of its assets as “theft,” with Kremlin spokesman Dmitry Peskov warning of immediate retaliation if the bill authorizing confiscation is enacted. Russian Deputy Foreign Minister Sergey Ryabkov suggested that Moscow could downgrade diplomatic relations with Washington in response to asset seizure.

The pivotal question revolves around whether G7 states will transition from merely freezing these assets to seizing them, effectively liquidating the funds to aid Ukraine. This issue has gained urgency amid waning support, particularly in the U.S. and Europe, for continued financial assistance to Ukraine’s defense efforts.

In the U.S., bipartisan support for the REPO Act empowers the president to confiscate Russian sovereign assets, directing them into a “Ukraine Support Fund” for reconstruction and aid.

However, the legality and economic ramifications of such actions remain contentious. Legally, the norm of sovereign immunity presents a significant obstacle to asset seizure, as it is a well-established principle in international law. Despite arguments for “countermeasures,” doctrinal support for asset confiscation remains scant.

Seizing Russian assets could benefit China

Economically, the repercussions of asset seizure could alienate allies and weaken the euro’s reserve currency status. Moreover, any negative fallout would primarily affect European nations, as most of the frozen funds are held in accounts at Euroclear.

The EU has hesitated to endorse outright confiscation, opting instead to redirect interest payments from the frozen assets to Kyiv. Nonetheless, the G7 continues to discuss the proposal for seizure, with the Biden administration, Canada and Japan advocating for its implementation.

As debates intensify, concerns about undermining international law protections and exacerbating discontent in the Global South persist.

The potential backlash against Western financial warfare could inadvertently benefit China, enhancing its diplomatic credibility and yuan internationalization efforts.

While China’s vision of a “de-dollarized” world could gain momentum from Western confiscation efforts, significant hurdles remain. The yuan’s current limitations, including strict capital controls and managed exchange rates, hinder its widespread adoption as a reserve currency.

A managed process of de-dollarization with broad participation could be beneficial, but a chaotic transition driven by Western actions risks exacerbating tensions and undermining international norms. It is imperative to tread cautiously and consider the broader implications before proceeding with asset seizure.

Watch this daily update from political commentator Alex Christoforou discussing Treasury Secretary Jannet Yellen’s push for the EU to steal Russian assets.

This video is from the channel Oldyoti’s Home Page on Brighteon.com.