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In the liberal media, one now frequently hears a droning argument that the West should seize Russian assets to further fund the Ukraine war or to provide capital for reconstruction.

As well as the increasing recognition that Ukraine is losing the war under current terms, there is also probably concern that Ukraine's resources have already been heavily mortgaged to Western bankrollers, and therefore victory may be pyrrhic anyway without debt forgiveness or some kind of subsidy of the debt from Western taxpayers.

So amongst those who want to continue fighting the war, and don't want Ukraine to end up like Haiti as a result of winning, there is obviously desire for the West to allocate more economic resources.

However, a seizure of Russian assets would seem to have two implications.

One, Russia will respond by seizing Western assets in Russian territory, which are said to be commensurate with Russian assets held abroad. The net effect of this exchange in terms of releasing capital, would basically be zero.

Two, the West would be (or would seem to be) openly declaring war on Russia by taking hostile economic action, which is different from the proxy war it is currently conducting. This direct confrontation, and potential escalation to nuclear war between major military powers, is exactly what the West has been avoiding.

Questions

  1. Is there anything that is achieved by the seizure of Russian assets, that wouldn't be achieved by the West simply allocating more of its own assets to the war in Ukraine (without the indirection of seizing Russian assets, and forfeiting Western assets in Russia)?

  2. If so, is the constant publication of this seizure proposal in the media, without critical analysis, essentially a disingenuous and continuing propaganda campaign (designed to disguise the desired allocation of domestic Western capital, and entry of the West into direct war with Russia, as being merely a reallocation of foreign Russian assets)?

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    This question begins with a rather long section making lots of points. I don't think this is a genuine question. It is presenting a case that Russian assets should not be seized. It could perhaps be rescued, there is, perhaps, a genuine question in there. But basically this could be shortened to "Seizing Russian assets is a bad idea, amiright!"
    – James K
    Commented Feb 25 at 22:45
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    @JamesK, that is precisely the question: do the seizures net off (as it certainly appears to me), or not? I'm not sure why you think that question is "not genuine". If my analysis is so well-known to be true that a question could not be genuine, then who exactly are the newspapers talking to with these articles of theirs which don't, in their content, follow my analysis?
    – Steve
    Commented Feb 25 at 22:58
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    Not genuine because you are not asking a question, you are rallying for support.
    – James K
    Commented Feb 25 at 23:13
  • Your question is stating the media is talking about it not senior politicians but even in that case it isn't a decision that they can make on their own . As I have stated there has been talk about this for a long time . This isn't the first question on the site asking about seizing those assets. politics.stackexchange.com/questions/83427/…
    – Joe W
    Commented Feb 26 at 0:56
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    @ItalianPhilosophers4Monica, I looked into the specific point about Western assets in Russia. I can't find a quantification of them. However, Russia has repeatedly claimed to have equivalent assets, and doesn't seem to have been at all contradicted, so it seems to go as an accepted fact in various media. It's also not intrinsically implausible. I'm happy to be corrected if you know otherwise.
    – Steve
    Commented Feb 26 at 12:32

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The net effect of this exchange in terms of releasing capital, would basically be zero.

YMMV because many Western assets there are captive to the Russian economy anyway, typically shares in companies that produce something in Russia. Western owners right now have the option to keep their money locked there in the hope of seeing returns after the war, or to sell at a (deep) discount.

Moscow already demands a 50% discount on all foreign deals after consultants selected by the Russian government have valued the business.

Also

Every western company seeking to leave Russia and sell its assets in the country will now be obliged to make a direct donation to the Russian state, a commission on foreign investments in the country has said. [...]

Under the revised rules, any decision to quit would leave companies facing the criticism that they are funding Russia’s war effort by making direct payments to the state budget.

Russia's assets in question [that are frozen in the West] in contrast are mostly cash-like, primarily Russia's central bank deposits in various fairly liquid forms.

And many Western owners of stock in companies located in Russia probably wouldn't spend all that money on aiding Ukraine anyway. "The West" is not the single accounting entity that that Russian presser makes it to be. (The equivalence claim from the Q originates in a Russian source, of course.)

And when you say "The net effect of this exchange in terms of releasing capital, would basically be zero", you also ignore the time[liness] aspect. Even if the West would have gall to directly confiscate the shares of the Western investors in Russia (which is the equivalent transaction according to Russia--but not the same legally in the West) and send that to Ukraine, they can't actually get that money (to send) until after the war... because it's stuck in Russia until then. So, money sooner for Ukraine vs [maybe] money later.


The other things you propose, such the West spending/lending more to Ukraine are more equivalent on timelines, but not quite as equivalent in terms of the source of funding. If Russia retaliates against Western investors, so making them [effectively] pay for Ukraine, that will be future scare for anyone [from the West] investing in Russia (in the indefinite future), and will also penalize people who took a risk [in the past] in investing in Russia, instead of taxing everyone in the West in the regular manner (regardless of their deliberate Russia-risk exposure).

And for the nitpicker, yeah, technically speaking the Russian Central Bank and the Russian state budget aren't technically the same either, but it's much easier politically to move money between those pots in Russia. (And Russia, deliberately or otherwise, pretends that Western investors in/to Russia are like a "Western central bank", which they are almost certainly not.)

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  • I've just left a comment on the question, responding to your original comments. You say Russia's assets are "liquid", but they are almost certainly already invested in the Western economy, and they aren't currently liquid for Russia. That is, the West already has the use of the capital, if not the ownership of it. I'm unclear why, especially in war, it should be a comparative advantage for the West to seize ownership of financial assets in the West, in exchange for forfeiting ownership of industrial assets in Russia?
    – Steve
    Commented Feb 25 at 22:16
  • @Steve: "That is, the West already has the use of the capital, if not the ownership of it." It's debatable. The CBR likely did not invest in stocks. Those are too risky for a central bank. For now the EU has been confiscating the interest on those CBR balances consilium.europa.eu/en/press/press-releases/2024/02/12/… Commented Feb 25 at 22:19
  • If it is not invested, then how is it generating the returns which are currently being withheld? I'm not a financier, but I'd be very surprised if £300bn of assets could be stored statically without massive atrophy in value. Even if you bought gold, a buy of that size would send the market price skywards during the buy phase, and then the price would plummet during the sell phase, causing massive atrophy in value. Or if you drip feed to avoid disrupting the price too much at once, then it's not a liquid asset at all anymore but an asset with a massive latency in realisation.
    – Steve
    Commented Feb 25 at 22:44

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