The Bank of Russia intends to challenge the freezing of Russia's gold and foreign exchange reserves in court.
This was announced on Tuesday, April 19, by the chairman of the Central Bank, Elvira Nabiullina.
“We will also prepare lawsuits, we are getting ready to present them.
Because it is unprecedented on a global scale for the gold and foreign exchange reserves of such a large country to be frozen, ”TASS quotes Nabiullina.
Recall that since the end of February 2022, the United States, the European Union and a number of other states continue to impose ever new economic sanctions against Russia.
This is how the West reacts to Moscow's decision to launch a military special operation to protect the Donbass republics from aggression from Ukraine.
In particular, Western states have blocked almost half of Russia's gold and foreign exchange reserves.
According to the Ministry of Finance, we are talking about freezing the country's cash reserves for a total amount of about $300 billion.
“The Central Bank will probably sue in each specific jurisdiction where the funds were frozen.
That is, the defendants will be banks and financial organizations on whose accounts Russian money is placed, ”Maria Yarmush, a specialist in civil and international law, told RT.
According to her, foreign organizations had to return the money at the first request of the Russian side, but did not do this.
As the expert explained, from a legal point of view, this could only be done on the basis of a court decision in a criminal case.
However, in this case, foreign partners acted according to the decree of politicians, and there are no laws allowing this to be done, as well as similar precedents, the specialist noted.
However, foreign courts will have to be guided by existing laws.
Against this background, the defendants will have to explain on what basis the funds were frozen, Yarmush added.
“The Central Bank has a good chance of unfreezing assets through the courts, since no one has canceled the right of ownership, and in these countries this right is very well protected.
As a result, according to the court, such freezes can be declared illegal, because the banks had no legal basis for blocking money.
The defendants will probably go to great lengths to come up with and substantiate from a legal point of view the desires of the politicians by whose decree they acted, ”explained Maria Yarmush.
It is noteworthy that in response to the partial freezing of gold and foreign exchange reserves by the West, the Central Bank limited the movement of capital to unfriendly countries by a comparable amount.
In particular, the regulator banned foreigners from selling Russian securities and withdrawing funds from the country's financial system.
As Maria Yarmush noted, Russian law allows the introduction of retaliatory restrictions in the event of unfriendly actions by other states.
“We can take back what we have been deprived of.
For this, a court decision is needed, in which it will be justified from a legal point of view, what and how was blocked.
That is, even if, by decision of a foreign court, they refuse to return the funds to us, then we can use the right to block foreign accounts.
In other words, we will keep these funds until our reserves are returned to us,” Yarmush said.
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As Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, suggested in a conversation with RT, lawsuits in the Russian reserves case could take quite a long time.
However, such a situation can play into the hands of Moscow to a certain extent, the expert believes.
“If our funds are under litigation, then from a legal point of view, no one can claim them.
This is especially true now, when Ukraine is calling on Western partners to transfer the frozen funds of Russia to it, ”Razuvaev explained.
Looking at risks
As follows from the materials of the Central Bank, at the time of the imposition of sanctions, the volume of Russia's gold and foreign exchange reserves exceeded $643 billion. Some of these reserves were placed on the accounts of foreign banks and organizations.
According to the latest available data, at the beginning of 2022, the main volume of Central Bank reserves accounted for the euro (33.9%), gold (21.5%), yuan (17.1%), dollar (10.9%) and pound sterling (6.2%).
The remaining funds were distributed among other currencies.
At that time, 6.4% of Russia's foreign exchange reserves were placed in the United States, 5.1% in the UK, 9.3% in Japan, 9.9% in France, 15.7% in Germany, and China - 16.8%.
About 15% more was kept by the Central Bank on the accounts of other countries and interstate organizations.
Gold, meanwhile, traditionally remains in Russia and is in the vaults of the Central Bank.
As previously noted in the Central Bank, it was impossible to avoid a partial freeze of Russia's gold and foreign exchange reserves in dollars and euros.
Non-cash currency is always reflected in correspondent accounts in foreign banks and therefore can be blocked, the Central Bank explained.
Note that the regulator distributes reserves across several currencies and countries to minimize risks in case of various external shocks.
For example, financial crises are accompanied by falling prices for export goods and the outflow of capital from the country.
In this case, it is beneficial for Russia to keep part of the gold reserves in those states with which Moscow is actively trading and in whose currencies the debts of companies, banks and the government of the Russian Federation are denominated.
Meanwhile, in order to withstand political crises, the country needs reserves that cannot be affected by the sanctions of Western states.
For this reason, in recent years, the Central Bank has significantly increased the share of gold and yuan in gold reserves.
“Since 2014, the Bank of Russia has been consistently pursuing a policy of building up and diversifying international reserves in order to have, in fact, two safety cushions: in case of materialization of financial risks, when the financial market’s need for US dollars and euros is high, and in case of a geopolitical crisis, when be restricted Russia's access to most reserve currencies.
And now, after the freezing of reserves in their currencies by Western countries, Russia continues to have a sufficient amount of reserves in gold and yuan,” Elvira Nabiullina explained.
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© Press Service of the Bank of Russia
At the same time, the Central Bank emphasizes that the storage of all reserves within Russia completely deprives the state of protection from external shocks.
This is how the country lived in 1992-1999, and "it was an almost ongoing financial crisis," recalled the Central Bank.
Currency transition
Earlier, Prime Minister Mikhail Mishustin compared the freezing of Russian reserves with piracy and robbery from the West.
In turn, Vladimir Putin noted that the sanctions rhetoric of Western countries crossed out confidence in the currencies of the United States and the European Union.
“The collective West has actually drawn a line under the reliability of their currencies... Both the United States of America and the EU have declared, in principle, a real default on their obligations to Russia.
And now everyone in the world knows that obligations in dollars and euros may not be fulfilled,” Putin said.
According to Alexander Razuvaev, in the current circumstances, many states may think about the advisability of keeping their money in dollars and euros.
As a result, countries will begin to redistribute the structure of their own reserves and more actively switch to settlements in national currencies, the analyst is sure.
“Against this background, the share of the dollar and the euro in trade and bank reserves will gradually decline in the long term.
A number of states will increasingly use the yuan.
Meanwhile, in the CIS countries, monetary regulators may begin to increase the share of the ruble in reserves due to the large trade turnover with Russia,” the expert concluded.