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Allies Begin the Reckless Seizure of Russian Assets

The Russo–Ukrainian conflict rages on. As Moscow’s forces gain ground, Kiev and its backers increasingly betray desperation. Ukraine’s President Volodymyr Zelensky is urging the allies to deploy airpower, while France’s President Emmanuel Macron talks of sending NATO troops into combat. 

The allies also are moving to seize Russian assets to pay for weapons their peoples have tired of providing to Kiev. Doing so would both offer only minimal support for Ukraine’s faltering defense and be a direct attack on the West’s rule of law and liberal democratic order. 

From the start, Ukraine became a moral cause as much as a foreign policy issue. That is understandable, since Russia’s invasion triggered a horrific conflict that has unleashed enormous death and destruction. Yet the humanitarian focus is convenient. Washington and its European partners share blame for the war, having violated multiple assurances of not expanding NATO and ignored a flurry of deadly warnings from Moscow. Many of the moralizing American elites so fervently behind Kiev previously backed U.S. military action—a potpourri of illegal wars, fraudulent crusades, misguided missions, drone bombardments, and other interventions—costing hundreds of thousands of lives in Iraq, Yemen, Afghanistan, Libya, and elsewhere. 

After Russia’s invasion, allied governments froze assets of Moscow on deposits and property of some so-called oligarchs located in the West. Proposals soon emerged to use this wealth for Ukraine, both in the ongoing conflict and for reconstruction afterwards. Unsurprisingly, the strongest supporter of turning Moscow’s cash over to Kiev is Kiev. Earlier this year, Zelensky advocated 

a “strong” decision this year for the frozen assets in Western banks to “be directed towards defense against the Russian war and for reconstruction” of Ukraine. “Putin loves money above all,” he said. “The more billions he and his oligarchs, friends and accomplices lose, the more likely he will regret starting this war.”

The Biden administration backed seizure legislation that recently passed Congress, but is meant to act in unison with Europe. European governments vary in their enthusiasm for confiscation. Belgium hosts the bulk of Russian state holdings and proposed to use some of the resources “to buy military equipment, humanitarian aid and help with the rebuilding of the war-torn country.” 

Although most advocates would devote the money to Kiev, Robert Zoellick proposed treating Russia’s money as a cornucopia for all, “setting aside some of the Russian reserves to assist developing countries that have been demonstrably hurt by higher food and energy prices. In addition, some amount could be allocated for claims by companies that suffered Russian retaliation.” 

After months of wrangling, the European Union agreed on a compromise: to use the income from frozen Russian state assets, about $3.25 billion annually, for Ukraine, mostly for weapons purchases and infrastructure development. Yet seizing profits but not principle is like pretending to be only a little bit pregnant. Per the noted Kremlin spokesman Dmitry Peskov, “even the smaller option is to us nothing less than expropriation.” Pressure to grab the rest will inevitably increase.

Nevertheless, not everyone backs taking money from a state with which the West is not at war, indeed, one which has amassed its wealth by trading with the very same governments and peoples. However convincing the case for Moscow’s culpability, the charge remains an accusation, not a judgment. No legal proceeding has imposed damages on the Russian government or people. If punishment is based on the claim du jour, the innocent will be as vulnerable as the guilty. 

Assets are commonly frozen in international disputes but only rarely confiscated. Precedents typically involve United Nations Security Council approval or international treaties, neither of which is present or likely to occur. Other justifications also fail. For instance, confiscation cannot be vindicated as a “countermeasure” to aggression because that action belongs to the victim alone, not to bystanders. 

Moreover, lawlessly seizing assets makes a mockery of the “rules-based international order” that Western officials routinely hype. Allied conduct already reflects ostentatious hypocrisy, as the very nations which write the rules routinely break them. Indeed, the Western accusers, most notably the U.S., have committed similarly costly crimes. Lawlessly seizing another nation’s assets while criticizing it for undermining international law would fuel cynicism toward Western claims.

Some European governments, such as those in France and Germany, recognize the danger of the abandonment—or, worse, tearing down—of legal safeguards, which would affect their own citizens as well as Russians. If passion replaces reason as the basis for legal policy, no property holder will be safe. Christine Lagarde, president of the European Central Bank, observed that such a process would “start breaking the international legal order that you want to protect, that you would want Russia and all countries around the world to respect.” 

Moscow likely would retaliate by seizing the property of American and European firms. The latter is estimated to be worth about $288 billion in 2022, roughly comparable to the West’s holdings of Russian state accounts. European institutions hold the bulk of Russian assets, which means they would be top targets for retaliation by Moscow and its friends. Although Western companies are not responsible for allied government policy, Moscow is not likely to let such details get in the way. Although the Russian economy loses when foreign capital disappears, many firms and individuals gain, acquiring cheap foreign assets. Indeed, for Putin, confiscation simultaneously minimizes foreign influences and benefits government supporters—a twofer.

Russian officials have also threatened to break diplomatic relations, which would further diminish communication between the world’s two most powerful nuclear states. The wider the political gulf becomes, the harder it will be to rebuild a relationship after the war ends. Yet the U.S. has much at stake in changing Moscow’s behavior involving a range of issues, including policy toward China, North Korea, and Iran.

If Western governments ostentatiously steal Russian assets because they can, their economies will suffer a “seizure risk premium.” Governments of foes and friends alike—authoritarian Mideast dictatorships would be at as much risk as Putin’s autocracy—would likely look for alternative locations to stash their money. They also would tend to avoid dollar-denominated assets. The U.S. still enjoys strong economic advantages, with the world’s largest, deepest, and safest capital markets, but that value is based in part on the legal protections afforded property owners. Washington’s increasing propensity to treat other people’s assets as weapons encourages the search for new, better national repositories.

Ultimately other countries might decide to seize allied, and even American, assets to punish Washington for its promiscuous war-making. That might be unlikely as long as the U.S. possesses the globe’s dominant military, but international power is shifting. Promiscuous war-making makes Washington a prime target. Imagine members of the Global South grabbing American properties and deposits in response to the invasion of Iraq, which wrecked a nation, unleashed al-Qaeda in Iraq and the Islamic State, killed hundreds of thousands of civilians, and destroyed multiple minority religious communities. Today’s purported masters of the universe might eventually regret setting a precedent of foreign governments grabbing whatever they want from whoever they want whenever they want.

In the end, destroying today’s legal order is a dangerous strategy. The effort reminds one of Sir Thomas More in A Man for All Seasons

Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!

William Hague, a failed British politician turned columnist, responds with what he views as the killer argument: “We have passed the point at which those assets will ever be returned. They would be better used to support Ukraine and to impose an escalating penalty on Putin.” Hague is profoundly mistaken. Appropriating the property would offer Moscow another reason to continue fighting for victory. Better to leave the final status of Russian assets a matter for negotiation, an inducement for the Putin government to agree to a reasonable peace. With Kiev’s leverage steadily falling as it loses more territory, the allies should be discreetly chatting with Russian interlocutors about what kind of peace might be possible. 

Vladimir Putin is the perfect stereotypical villain, a seeming heaven-sent target for asset forfeitures. Yet he should be joined by the gaggle of allied officials who violated their promises and ignored his warnings, who also bear responsibility for the carnage occurring in Ukraine. Even in the best case, seizure of Russian assets would reflect rank hypocrisy and crass self-interest.

Yet the most dangerous consequence of allied confiscation might be to make it even harder to end a war that should never have started. No doubt, Ukrainians want justice. Nevertheless, that looks ever less likely as death and destruction mount. Today Ukrainians most need peace and frozen funds could be used as part of a settlement. For that reason alone, the U.S. and its European allies should eschew the temptation to illegally plunder the invader’s property.



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