2024-02-28 08:58:50
The seizure of Russian assets frozen in Western accounts since the start of the war in Ukraine continues to divide the G7. The Americans are having difficulty overcoming the reluctance of the Europeans. The subject will be discussed at the G7 Finance meeting which is being held this Wednesday in Sao Paulo, Brazil.
Seizing 260 billion euros overnight and handing them over to Ukraine is tempting. Especially at a time when the West is struggling to maintain the level of aid necessary for Ukraine to resist the Russian offensive. Such an operation has already been carried out, but not for such a large amount and not to the detriment of such a belligerent belligerent either. Europeans control two thirds of frozen assets of the Russian Central Bank, they therefore believe they are more exposed to possible retaliation from this record seizure. Like an avalanche of legal proceedings and financial retaliatory measures likely to weaken the euro.
Read alsoWar in Ukraine: the EU freezes 17 billion euros in assets of Russian oligarchs and entities
Should Europeans’ fears be put into perspective?
To believe Janet Yellen, the American Secretary of the Treasury, who reaffirmed yesterday, Tuesday February 27, that the seizure was the best possible option, the operation is without risk for the dollar as for other Western currencies. The central banks of emerging countries, whether Chinese or others, do not really have alternatives to diversify their reserves, she points out. The most traded convertible currencies and therefore the most sought after on the foreign exchange market are not yet the renminbi [nom officiel de la monnaie chinoise, NDLR] and even less the ruble, but the dollar, the pound sterling, the Swiss franc, the yen and the euro. Recent history supports the Treasury Secretary’s approach. The seizure of Russian assets did not lead to panic and massive withdrawals by the central banks of emerging countries.
The threat to foreign companies still present in Russia
Russia is also threatening to attack the assets of Western companies still present on its territory. Here too, the power of harm seems weak, since the damage has already been done. Foreign companies are effectively prevented from repatriating their assets. On the economic level, the fallout feared by Europeans is exaggerated, estimates analyst Alexander Kolyandr in an article published by the American Carnegie Foundation for International Peace. The Europeans made a first gesture by deciding to hand over to Ukraine the interest produced by these assets. They need additional collateral to go beyond. If their currency were to fall as a result of this seizure, the cost of the debt would soar, an additional burden for the region already very weakened by the war at its gates.
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A legal sleight of hand to break the deadlock
To break the impasse, these assets could not be seized, but used as guarantee for a loan issued by kyiv of an equivalent amount to finance its reconstruction, suggest a group of legal experts. The American administration wants to reach a solution before the presidential election in November which could compromise this scenario if Donald Trump were to win. The objective is therefore to find a consensus at the G7 summit scheduled for Italy in June.
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