Valdai Club

On January 23, the Valdai Club held an expert discussion, titled “From Freezing to Confiscation: Risks for Russian Assets in the West”. 

Moderator Ivan Timofeev, programme director of the Valdai Club, noted that the issue of assets being confiscated from Russian individuals abroad has arisen in the context of the notorious “sanctions tsunami” — an unprecedented number of restrictive measures which have been imposed against Russia. One of the basic instruments of the sanctions policy towards Russia has been blocking sanctions, which imply the freezing of assets, but not their alienation. However, now steps are being taken for these assets to be seized and transferred to Ukraine. So far, only Canada has a legal mechanism for this, but its analogues are already being developed in the US and the EU.

Dmitry Timofeev, director of the Department for Control over External Restrictions of the Ministry of Finance of the Russian Federation, believes that the Canadian precedent will unlikely become universal. In Western countries, the institution of private property is a fundamental myth which underpins much of the value system. The blocking of property is a kind of fig leaf, but a full-scale confiscation would mean a departure from fundamental principle in the name of political expediency. In addition, Western countries benefit greatly from hosting foreign financial assets. By creating a precedent for confiscation, they may ruin these benefits. Against this background, Timofeev sees the most likely outcome as being these outcomes remaining frozen, rather than being confiscated.

Jacques Sapir, professor of economics at the Paris Higher School of Social Sciences (EHESS) and Lomonosov Moscow State University, stressed that there have already been precedents for the freezing of assets in history, but with confiscation, the world “will enter uncharted waters.” Many lawyers believe that Canada, if it uses its confiscation mechanism, will face numerous and difficult legal proceedings. In addition, the confiscation measures will have serious international repercussions. One of the key factors of globalisation is the large volume of international investment in different countries. The adoption of laws that threaten the inviolability of this capital may provoke its outflow from the respective countries. This will lead to a split of the world into different regions and the end of globalisation. Among other possible consequences, the economist named de-dollarisation and the complete destruction of the international monetary system.

Dmitry Kiku, Deputy Director of the Department for Control over External Restrictions of the Ministry of Finance of the Russian Federation, pointed out that today the Western camp apparently has no consolidated position on the issue of confiscations. But, perhaps, radical states, such as Canada or Poland, will try to probe the situation, and the rest of the Western countries will observe their example, how confiscation initiatives work in practice and whether it makes sense to join them. Kiku also stressed that in Canada the issue of seizing the assets of Russian private citizens is being considered, but so far there is no talk of state assets. But it is alarming that Western states are trying to institutionalise the idea of confiscation through international organisations. Speaking about possible retaliatory steps, Dmitry Kiku noted that a number of Canadian assets are still present in Russia. The question is how expedient it is for the Russian economy and the Russian investment climate to use punitive measures.