Frozen Russian assets... a financial war between Moscow and the West

Moscow -

The imposition of Western sanctions on Moscow came as it did not like the policy of attracting foreign investments, which constituted one of the most important strategic directions for the development of the Russian economy.

And in front of the raging war of freezing financial assets between the two sides, the plan to remove obstacles that prevented the attraction of European and American investments to Russia and the creation of an appropriate investment climate for it has completely collapsed.

In addition, the proposal of the Russian Ministry of Finance to exchange the frozen assets of Western and Russian investors did not receive any response from the United States and European countries. This mechanism is based on replacing the assets of Russian investors that were frozen by Western countries due to sanctions with foreign investors' funds seized inside Russia.

And in light of the frequent talk in Europe and the United States of confiscating frozen Russian assets and directing them to Ukraine for reasons of reconstruction, the war of confiscation of assets between the two sides has entered a stage unprecedented in history, in addition to the possibility that the resulting legal "engagement" will extend for decades.

How much are Russian assets frozen in the West?

The Russian Ministry of Finance estimated the volume of assets frozen by the West at between 300 billion and 350 billion dollars, which is about half of Russia's gold and foreign exchange reserves, and basically we are talking about cash gold, debt securities and currencies.

Although legally this money is still owned by Russia, it cannot dispose of it because of the sanctions.

In this regard, foreign investments in general in Russian companies even before the war in Ukraine decreased by more than 20 times. According to the results of the year 2021, the volume of foreign investments in Russian companies amounted to $ 1.4 billion in the long term, which almost matches the level of the mid-1990s.

What are the EU estimates of the volume of Russian assets confiscated?

European Commissioner for Justice Didier Reynders made it clear in October 2022 that Brussels had frozen Russian assets worth 17.4 billion euros, including bank accounts, real estate, yachts and other luxury goods for 1,350 Russian citizens and companies that fell under European sanctions, which is more than 7 billion euros from The amount of money confiscated in May of the same year.

Who is the Russian party most affected by the asset freeze?

The Russian Central Bank stands at the head of these entities, whose share of the "freeze" amounted to 23 billion euros. According to data at the beginning of this year, quoting an internal document of the European Union, the countries of the Union have frozen Russian assets with a total of 68 billion euros.

According to the same document, 50 billion euros have been frozen in Belgium, and another 5.5 billion euros in Luxembourg, along with Italy, Germany, Ireland, Austria and France. These countries represent about 90% of all Russian assets frozen by the European Union.

What is the size of US investments in the Russian market?

The evaluation of the United Nations Conference on Trade and Development (UNCTAD) of foreign direct investment in the world's economies on the basis of the final investing country revealed that US investments in the Russian economy are in fact much greater than what the statistics of the Russian Central Bank indicate by about 13 times.

This does not seem strange if we take into account that many foreign investments in Russia are through countries that are not considered the direct source of these investments. For example, an American company can buy a share in the capital of a Russian company through its Dutch or Irish branch, which prevents access to Fixed and final figures about the actual size of these investments.

As a result, investment data from countries such as the United States, Germany, France, etc. are systematically underestimated, while flows from countries such as the Netherlands or Luxembourg or/and countries and regions that offer favorable conditions and privileges for conducting commercial and financial activities are overestimated.

According to the UN data cited with the annual study on foreign investment in the world, the United States constitutes the largest investor in the Russian economy, and it amounted - according to the latest data - 8.9% of the total accumulated investments, or 39.1 billion dollars out of 441.1 billion.

How big are the assets of "unfriendly" countries in Russia?

After freezing Russian assets abroad, Dmitry Medvedev, deputy head of the National Security Council, warned that Moscow could retaliate by nationalizing the assets of foreign companies and individuals with "unfriendly jurisdiction".

And last November, when the UN General Assembly adopted a resolution on the need to create a compensation mechanism for Ukraine, Medvedev repeated that Moscow would then begin to seize the property of foreign companies.

According to various estimates, there are trillions of dollars worth of property, accounts and other assets of companies from unfriendly countries in Russia.

The Russian Central Bank says that the total volume of foreign investment in the Russian economy, as of October 1, 2021, amounted to about $1.18 trillion.

More than half of this money ($679 billion) is business equity, another $392 billion is all kinds of debt: bonds, loans and trade advances, and the rest is cash, deposits, IMF special drawing rights and other investments.

And since the Russian authorities - in response to the sanctions - took preventive measures to prevent the withdrawal of capital from the aforementioned countries abroad, these funds have already been seized inside the country, and these statistics do not include the so-called "intermediary parties", which are, in fact, transit points for investments.