During the recent G20 finance ministers meeting in Brazil, delegates were gripped by a sense of unease regarding the potential seizure or use of Russian assets frozen under western sanctions following its invasion of Ukraine. Saudi Arabia’s Mohammed al-Jadaan and Indonesia’s Sri Mulyani Indrawati were among those expressing alarm at the idea, questioning if G7 countries were seriously considering such a move and its full implications.
The debate revolves around whether the frozen Russian central bank assets, amounting to hundreds of billions of euros, should be utilized to fund Ukraine as the conflict enters its third year. The US and its allies argue that mobilizing these assets could turn the tide of the war in Kyiv’s favor. However, opponents fear this could set a dangerous precedent in international law, threatening the interests of any country at odds with western powers.
US President Joe Biden is urging allies to find ways to tap into the roughly €260bn of Russian reserves, with the upcoming G7 leaders’ summit in Italy seen as a crucial moment for progress. While the Biden administration, Canada, and some UK officials support asset confiscation, countries like Japan, France, Germany, Italy, and the EU remain cautious, resulting in a stalemate.
G7 central bankers, including European Central Bank president Christine Lagarde, are wary of the destabilizing effects of seizing foreign reserves. There are concerns about the legal basis for such actions, with Italy and France expressing doubts about the feasibility of confiscating Russian state assets.
International stakeholders, including Indonesia and Saudi Arabia, have lobbied against asset seizure, fearing for the safety of their own reserves held in western institutions. There are worries about the precedent such a move would set, potentially leading to a cascade of reparations claims and challenging the principle of state immunity.
While Ukraine supports the confiscation of Russian assets as a means of enforcing war reparations, other G7 members are cautious about violating international law. The debate continues on how to utilize the frozen assets, with China expressing concerns about the credibility of the international financial system if such actions are taken.
While an all-out seizure of Russian assets is no longer on the table, G7 officials are exploring alternative methods of extracting funding from the frozen reserves. The discussion continues as countries weigh the legal, economic, and geopolitical implications of such a significant decision.