On June 27, the Valdai Club hosted a discussion on the confiscation of Russian assets abroad.
The moderator, Ivan Timofeev, highlighted that a new development has emerged in this regard. While previously, the emphasis was on freezing assets, the current concern involves the dispossession of property rights. He went on to state that these measures are gradually evolving and suggested that this is not the final stage.
Dmitry Timofeev, Director of the Department for Control of External Restrictions of the Ministry of Finance of the Russian Federation, believes that it is difficult to determine at this point whether Western countries will choose to seize Russian assets.
He emphasized the importance of the institution of private property in the Western world, noting that confiscation measures could undermine this foundation. As a result, Western nations are hesitant to adopt such measures and instead seek more moderate approaches. According to Timofeev, recent actions by the US Congress have shifted decision-making responsibility on these matters to the president.
If Western countries do decide to confiscate Russian assets, Timofeev believes it would constitute a significant strategic mistake.
However, Timofeev noted that at present, politics dominate economic considerations and Western countries may be willing to ignore economic consequences and strategic implications in order to achieve short-term political goals.
If prior to the election Washington is likely to try to avoid taking drastic measures that could destabilize the situation, after the election, particularly if Donald Trump is elected, the current administration could well “turn over a new leaf.”
Ekaterina Arapova, Director of the Center for Expertise on Sanctions Policy at the Institute of International Studies, Deputy Dean of the Department of International Relations at the MGIMO University, emphasized the practice of seizure, legislative registration, and implementation of secondary sanction regimes as sources of global mistrust in various fields — in world reserve currencies, pricing principles in markets, and protection of property rights.
Against this backdrop, economic power centres are reconsidering their policies and exploring new instruments to manage potential risks. This has resulted in an increase in transactions in national currencies, the establishment of domestic payment systems, and efforts to integrate these systems. These trends are likely to continue in the medium-to-long term.
Another significant development is the growth of gold reserves, which are a well-established instrument for risk management.
Finally, large emerging market economies are gradually reducing their investment in US government debt.
John Gong, Vice-President of Research and Strategy at the University of International Business and Economics – Israel, understands the rationale behind the move towards confiscatory measures in a military situation. In light of Russia’s success, the Western world is seeking to increase assistance to Ukraine in order to prevent its complete defeat. However, public support for such assistance from state budgets is decreasing. “That is, funds are dwindling, and hence, it is understandable why these measures are being considered,” he concluded.
The analyst suggests that Washington will try to avoid direct confiscation by implementing some kind of workaround mechanism for seizing and utilizing assets. However, from the perspective of Russia and other nations, there would be no change in the outcome. Funds withdrawn would allow the West to continue supporting Ukraine for approximately another two years.
However, if such a measure were implemented, it could set a significant precedent and potentially accelerate the process of de-dollarization. As John Gong summarized, “it would be as if the United States were shooting itself in the foot.”
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
