The US and its European allies are torn between their short-term and long-term interests in deciding what to do with $300 billion of Russian reserves frozen since the invasion of Ukraine in 2022. They are aching to confiscate the Russian assets to fund the Ukrainian war effort and economy but constrained by worry it could reduce the demand for bonds predominantly issued in their currencies which have historically been considered risk-free by international lenders.
"States, fearing the security of their dollar- or euro-denominated assets, may shift their reserves out of U.S. and allied jurisdictions and into alternate currencies, such as the Chinese renminbi”, a report from the Brookings Institute warned recently. Even a slight shift would raise borrowing costs for Western governments, corporations, and other investors. It would also the imposition or threat of sanctions to bring other states to heel less intimidating. https://www.brookings.edu/articles/why-do-the-u-s-and-its-allies-want-to-seize-russian-reserves-to-aid-ukraine/? Germany, in particular, is balking. The Scholz government fears the seizure of Russian assets would set a precedent for renewed Polish and Greek reparation claims against Germany resulting from WW II. There are also an estimated 270 German firms still operating in Russia which has threatened to retaliate against any Western seizure of its foreign assets. The move could also open other European capitals to claims over slavery and colonialism, the Wall Street Journal reported yesterday. The US aid bill for Ukraine and Israel passed by congress last week gives the Biden administration authority to seize approximately $6 billion of Russian assets held in US banks. The Europeans favour confiscating or taxing the interest on Russian assets rather than seizing them outright. "Within the G-7, a complicated compromise may be starting to emerge”, according to the Journal. "The U.S. has proposed that the group front-load 10 years of profits—essentially interest payments on matured assets—from the frozen funds. That money would act as collateral for a bond issued by a special-purpose vehicle set up by the G-7 to raise money for Ukraine. G-7 countries would guarantee the debt.” https://www.wsj.com/world/europe/world-war-ii-history-haunts-attempts-to-seize-russian-assets-eb066910 -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#30135): https://groups.io/g/marxmail/message/30135 Mute This Topic: https://groups.io/mt/105805645/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/8674936/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
