Russia vows to retaliate if G7 seizes $300bn of frozen assets

Western countries to discuss options for confiscating Russian central bank funds in February

Russia has aid it will regard any western confiscation of its central bank assets as theft. EPA
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Russia on Friday vowed to retaliate if western countries seized $300 billion of Russian assets frozen because of the war in Ukraine.

G7 countries are expected to discuss options in February as Ukraine calls for frozen central bank funds to be put towards the country's reconstruction when the war ends.

Russia has drawn up a list of western assets it could seize in a retaliatory move and said any move to confiscate its funds would amount to "theft".

"It will be a significant blow to the main parameters of the international economy, it will undermine the international economy," Kremlin spokesman Dmitry Peskov said.

"It will undermine the confidence of other countries in the United States, as well as the EU, as economic guarantors. Therefore, such actions are fraught with very, very serious consequences."

About $300 billion of Russian central bank assets are frozen under western sanctions, meaning Moscow cannot use the money to fund its war effort.

The EU said last year that it froze another €19 billion ($21 million) belonging to Russian oligarchs as part of a suite of sanctions meant to increase the pressure on Moscow's elites.

Although several western governments have expressed interest in diverting Russian money to Ukraine, legal and practical questions mean little has been done.

Amid concerns that a seizure would damage the EU's reputation, officials have developed plans that would only address the interest gained on idling Russian assets, rather than the underlying amount.

Belgium, where many Russian assets are held in clearing houses, said it planned to invest about €1.7 billion in Ukraine next year after drawing on the tax revenue from those assets.

But leaked plans for February's G7 meeting show new legal theories will be put forward on confiscating the Russian central bank's assets, which are mostly held in euros, with some funds in US dollars and British pounds.

The cost of Ukraine's reconstruction has been estimated at more than $400 billion by the World Bank. Kyiv is urging the US and EU to confiscate Russian sovereign funds and the private wealth of oligarchs.

The assets could also be used as a bargaining chip to force Russia to pay compensation for its invasion of Ukraine.

Russia's veto power on the UN Security Council means there is essentially no chance of the world body authorising compensation, as it did after Iraq's 1990 invasion of Kuwait.

Updated: December 29, 2023, 12:31 PM