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Nov 17, 2022
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Planned theft of Russian assets – how will Moscow respond?

At a meeting of the UN General Assembly on November 14, where a draft resolution on Russia’s compensation for damage to Ukraine as a result of the NWO was discussed, it was recommended“creating her [ГА ООН]members, in cooperation with Ukraine, of an international damage register, which will serve as documented evidence of claimed damage, loss and injury, <...> incurred as a result of the internationally wrongful actions of the Russian Federation in or against Ukraine, as well as to promote and coordinate data collection“. The draft document was supported by 94 members, opposed by 14, another 73 UN members abstained.

Washington is trying to legalize the expropriation of Russian assets, which are now under freezing by the collective West. As the Russian Ministry of Finance reported in March, the amount of frozen reserves amounted to $300 billion. In addition to official foreign exchange reserves, other assets of Russian origin were also frozen – both the personal property of Russian oligarchs (yachts, villas and palaces, aircraft, bank accounts) and property located on the balance sheets of Russian companies and banks (shares in the capital of foreign companies, bank accounts, etc.).

In March, a multinational task force was set up in Washington, tasked with identifying assets of Russian origin, preparing proposals to freeze them, and keeping a record of what has already been frozen. At the end of June, the group presented a report according to which, at the beginning of the summer, the total value of blocked Russian assets was estimated at $330 billion.

In recent months, the freezing process has continued. European Commission (EC) official Christian Wiegand On October 27, he said: “We have made progress, in April we started with about 6.7 billion euros, and today this amount is already 17.5 billion euros.” According to the representative of the EC, the sanctions affected the assets of 1,350 individuals and organizations. Most blocking was carried out in Germany, Belgium, France, Luxembourg, Ireland, Italy and Austria.

The numbers are very fragmentary, but I think I won’t be too wrong if I say that the amount of frozen assets of Russian individuals and legal entities today is approaching $50 billion. Not today or tomorrow, the West may announce the transfer of the foreign exchange assets of the Russian Central Bank from the status of frozen to the status of confiscated and try to cover up this theft with the authority of the UN.

Deputy Head of the Security Council of the Russian Federation Dmitry Medvedev reacted sharply to the meeting of the UN General Assembly on November 14: “If, on the basis of a decision of the UN General Assembly, sucked out of a known place by enemy countries, national acts are adopted on the theft of Russian assets, we will have no choice. It will be necessary to irrevocably withdraw the money and property of private investors from such countries, although they are not responsible for the fools from their governments.“. According to Medvedev, such “money and other valuables” in Russia, enough to make up for what was stolen from Russia“.

Do we really have enough assets of non-residents for a worthy “response to Chamberlain”? Information on this subject can be found on the website of the Bank of Russia, which presents statistics on the regularly compiled document “International investment position of the Russian Federation“(MIP of Russia). The latest data is as of January 1, 2022.

The total value of assets is 1651.5 billion dollars. The total value of liabilities is 1.166.6 billion dollars. The difference between assets and liabilities is 484.8 billion dollars and is called the “net investment position”.

So, it turns out that in the Russian economy there are various assets of foreign origin for an amount significantly exceeding one trillion dollars! Medvedev is right that we have something to answer the collective West for its theft. Let’s see what the assets of non-residents consist of. Here are the main components of these assets (billion dollars): direct investment – 610.1; portfolio investments – 273.6; investments in derivative financial instruments (DFIs) – 5.8; other investments – 277.2. Let me remind you that direct investments are those that provide the investor with effective control over the investment object (company, bank, fund). Portfolio investments do not provide such control, their goal is to generate income. PFI investments are a new type of investment, their scale is still very small. Other investments – various credits, loans, loans.

So, more than half of all foreign assets in the Russian economy account for direct investment. They, first of all, should be used to cover the damage from the confiscation of Russia’s foreign exchange reserves. With other types of foreign investments, the situation is more complicated (for example, portfolio investments of foreigners are dispersed among thousands and thousands of Russian companies). The easiest and most obvious way to use foreign assets in the form of direct investment is to nationalize them.

Medvedev’s idea is good, but needs more work. He says: “It will be necessary to irrevocably withdraw the money and property of private investors from such countries… “. Those. not in general for all countries of the collective West, but only for those countries that carry out the theft (confiscation) of Russian assets. By the collective West, we mean those states that are included in the “list of unfriendly countries” compiled by the government of the Russian Federation. The list is growing. As of July 24, it included 49 states and territories; on October 30, there were already 60 defendants on the list.

Medvedev proposes to carry out counter confiscations of property only of those countries that will confiscate Russian assets. Less than a dozen countries took part in the freezing of foreign exchange reserves of the Russian Federation. It is from them that, at the suggestion of Medvedev, it is necessary to confiscate money and property. Here is a table that will help you understand whether we will be able to get the necessary satisfaction when implementing this idea.

tab. one.

The amount of foreign exchange reserves of the Russian Federation, frozen by individual countries, and the volume of direct investments accumulated by them in the Russian Federation (billion dollars)

The country that carried out the freezing of foreign exchange reserves of the Russian Federation

The amount of frozen foreign exchange reserves of the Russian Federation

Accumulated direct investments in Russia

France

71

23.7

Japan

58

3.3

Germany

55

25.4

USA

38

6.2

Great Britain

26

53.5

Austria

17

7.9

Canada

16

0.3

Sources: Bank of Russia; statista.com

As we see, it will not be possible to compensate for the losses incurred by the planned confiscation of Russia’s foreign exchange reserves by counter-confiscation of the accumulated direct investments of the same countries. Japan, for example, has frozen and may confiscate Russia’s foreign exchange reserves, which exceed its accumulated direct investment in Russia by 17.6 times. Other countries have a similar excess (times): France – 3.0; Germany – 2.2; USA – 6.1; Austria – 2.2; Canada – 53.3. Only one country of the collective West can be in a losing position. This is the UK. The accumulated direct investment of this country in the Russian Federation is more than twice the amount of those foreign exchange assets of the Russian Federation that the UK has frozen and is preparing to confiscate.

What if we use a different scheme? One that presupposes in response to the confiscation of Russian foreign exchange reserves, conduct a counter confiscation of the accumulated direct investments of all countries included in the list of “unfriendly states”. According to my very rough estimates, out of the total amount of all accumulated foreign direct investment in the Russian economy ($610.1 billion), the part that came to Russia from “unfriendly states” accounts for about $500 billion. Such assets would be enough in excess to cover possible losses from the confiscation of Russian foreign exchange reserves in the amount of about $ 300 billion.

However, under such a scheme, the main victims of the Russian retaliatory action may not be those countries that confiscate Russian foreign exchange reserves. Cyprus will be particularly affected: direct accumulated investments in Russia from this small island state amounted to $182.3 billion as of January 1 this year (about 30% of all foreign direct investment in Russia). We can also mention other major exporters of capital in the form of direct investment in Russia (billion dollars): Bermuda – 62.5; Ireland – 36.1; The British Virgin Islands – 5.0, etc. All of them are on the “black list” of the Russian government, but they did not participate in the freezing of Russia’s foreign exchange reserves.

I know that there will be both supporters and opponents of the scheme, which assumes that all the countries of the collective West, and not just a few countries that carried out such a freeze and are presented in my table, should be jointly and severally responsible for the freezing and confiscation of the foreign exchange reserves of the Russian Federation.

Judging by many signs, the confiscation promised by the collective West could happen in the first quarter of 2023. By this time, we should have a clear response plan ready.

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