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The writer is assistant professor of history at Cornell University and author of ‘The Economic Weapon: the rise of sanctions as a tool of modern war’
The western campaign of economic pressure against Russia is broaching a new domain: sovereign asset seizure. By March 2022, the US and EU had frozen roughly $300bn in Russian central bank reserves to retaliate against Vladimir Putin’s invasion of Ukraine. Now G7 countries are debating whether to confiscate this property.
In a recent discussion paper, the US government supports confiscation as a “countermeasure” for states “injured” and “specially affected” by Russia’s war. This claim invokes the international legal doctrine of reprisals: when a state inflicts harm on another, for example by violating its territory, the injured party can undertake proportional countermeasures against the wrongdoer. Reprisals are meant to compel respect with the law.
Continued western aid to Ukraine is morally, legally and strategically urgent. Yet as a justification for confiscating Russian state assets, the reprisals argument has three problems: it lacks compellent effect, it is being invoked by the wrong parties and it undermines the rules-based order western governments claim to defend.
The push for asset confiscation is driven by domestic political difficulties in securing long-term funding for Kyiv. As an instrument of pressure, its utility is slight. Any confiscation of reserves that have been unavailable for almost two years will not compel Putin to end his war now. Moreover, the $227bn current account surplus that Russia recorded in 2022 has replenished a substantial share of that lost in the initial freeze. Expropriation exerts no meaningful additional economic pressure.
Economic reprisals are the prerogative of injured states, not of third countries. Belligerents can also expropriate public and private property belonging to their opponents’ state and citizens. Ukraine exercised this right by seizing at least $880mn in Russian-owned property and businesses within its borders in May 2022.
Yet Kyiv’s allies are not at war with Russia. Belgium and France have frozen most Russian assets, holding €206bn in securities in the Brussels-based depository Euroclear and other financial institutions. But to expropriate these, they would have to become a more direct party to the Russo-Ukrainian war. While one could argue that eastern European states have been “specially affected” by the war’s economic and military spillover effects, it is much harder to make this case for the western European countries where most Russian reserves have been immobilised.
When confiscation has played a role in responding to aggression, it has sooner or later involved open war between seizers and seized. Germany lost most of its overseas property after the first world war. But seizing countries could only activate their powers of confiscation by declaring war on the Kaiser. Another precedent is the seizure of Iraqi foreign assets to punish Saddam Hussein for his 1990 invasion of Kuwait. Yet that followed UN authorisation for an international intervention to restore peace. Such examples suggest Ukraine’s allies cannot have it both ways, claiming wartime powers while insisting they are not at war with Russia.
The final issue is the destabilising precedent that western countries would set by seizing assets to end a war they are not openly involved in. This would broaden the coercive actions that states could take for disputes to which they are not a direct party. Had the west’s proposed interpretation been in effect then, Asian countries could have seized the foreign assets of any state in the US-led coalition that invaded Iraq.
Besides these political, legal and diplomatic problems, the best argument against a confiscation is that it is economically unnecessary. US and EU aid to Ukraine, military and economic, has so far amounted to significantly more than $100bn per year. This sum is easily sustainable for the transatlantic economy. A less risky approach would involve funding Ukraine with the several billion euros in annual profits accruing from Russian assets. As this would redirect income streams rather than touch the principal, international legal ramifications would be milder.
Helping Kyiv ward off Russian aggression defends national sovereignty and territorial integrity. But advocates of a rules-based order demolish their credibility if they respond to Moscow’s criminality with illegal measures of their own. Such conduct will accelerate the dissolution of the boundary between war and peace, alienate many states outside the sanctions coalition and dismantle a building block of the world they claim to defend.
Read the full article here
