Why Didn’t President Putin Retrieve US$340 Billion In Central Bank Assets Held Outside Of Russia Prior To 24 February 2022? He Expects To Get It Back Or Never Expected To?
Why Didn’t President Putin Retrieve The US$340 Billion Prior To 24 February 2022?
Freezing, but not seizing US$340 billion in assets of Central Bank of the Russian Federation (CBRF), of which more than 10%- approximately US$38 billion, is frozen in one country- the United States, is viewed, incorrectly, by leadership of those governments who have frozen the funds as a means of maintaining, rather than reducing or eliminating an incentive for the government of the Russian Federation to negotiate a resolution to its war with Ukraine. This perspective is misguided.
Among countries reported holding CBRF assets: France (US$74 billion), Japan (US$58 billion), Germany (US$55 billion), United States (US$38 billion), United Kingdom (US$26 billion), Austria (US$17 billion), and Canada (US$16 billion) among other countries.
First, correct to believe Vladimir Putin, President of the Russian Federation, will seek return of the US$340 billion in CBRF funds currently frozen. Mr. Dimitry Peskov, spokesperson for the government of the Russian Federation, shared that confiscation and use of assets of the government of the Russian Federation for benefit of Ukraine would be “illegal, blatant, and of course requiring an appropriate response... It would be, in fact, outright theft.”
Second, incorrect to adhere to a Potemkin-like belief that President Putin’s desire for return of the US$340 billion in CBRF funds currently frozen might today be persuasive enough for him to negotiate an end to the war absent retaining some level of commercial, economic, military, and political control or influence within those areas of Ukraine which have been breached since 2014 and further in 2022.
Two questions relating to motivation are important to understand the attachment that President Putin has to the US$340 billion funds frozen. 1) Since 24 February 2022 does President Putin retain confidence the CBRF funds frozen will be returned? and 2) Since 24 February 2022, does President Putin remain prepared to sacrifice the CBRF frozen funds because of his larger agenda- as a cost of doing business?
President Putin’s first belief enjoys ample justification given the reticence of leadership in governments to do anything to shift assets from cryostasis to confiscation 250-days, nearing nine months after the government of the Russian Federation directed the armed forces of the Russian Federation to invade and invade further into the territory of Ukraine and cause an estimated US$200+ billion in damage- thus far along with costs incurred by other countries (Hungary, Moldova, Poland, Romania, Slovakia). Leadership in governments continue to exhibit extraordinary cowardness as they equate the seizure of CBRF funds already frozen to someone with a gun to their head- when the person knows the gun is plastic and not loaded. This status quo continues despite the armed forces of the Russian Federation having accumulated for some months approximately 21% of the pre-2014 territory of Ukraine before relinquishing in recent months approximately 5%. Are Berlin, Brussels, London, Ottawa, Paris, and Washington awaiting for the armed forces of the Russian Federation to have 100% control of Ukraine prior to demonstrating financial fortitude?
Important to note that prior to 24 February 2022 neither leadership in governments nor central banks in those countries which held CBRF deposits issued public warnings to President Putin that the deposits could be seized and then confiscated or would be seized and then confiscated if the armed forces of the Russian Federation were to invade and invade further into the territory of Ukraine. That was the first tell projected publicly to President Putin as to the elasticity of responses to what he might do in Ukraine. Normally, poker players attempt to hide any changes in behavior or demeanor which would provide other players with intelligence as to intentions. In this instance, the players were showing all their cards to President Putin while he was keeping his cards held closely.
For the second belief, prior to 24 February 2022, President Putin could have easily, and justifiably given what he perceived and in reality was hostility from the governments of countries which held accounts of the CBRF, shifted all or significant portions of the funds to Moscow or to countries which would likely have protected the funds- or at minimum fought to protect them, for example the People’s Republic of China, Republic of Turkiye, Republic of India, Kingdom of Saudi Arabia, Islamic Republic of Iran among a few. He did not.
Such a movement of funds by the CBRF would certainly have been viewed as a signal of future intentions. A tell. However, a belief by others that the CBRF redirecting and re-accumulating funds held outside of the Russian Federation was a precursor to an invasion of Ukraine would not have justified seizure-in-advance of the funds based upon the belief in an intention. The creation of a financial-based version of the United States Constitution doctrine created in 1931 of Prior Restraint would not have been applicable.
Thus, a reasonable conclusion was and remains that the government of the Russian Federation was prepared to relinquish the funds as a cost of its excursion into Ukraine- a massive, yet acceptable cost of doing business.
Given this, how much leverage then exists today in terms of continuing to freeze the funds of the CBRF rather than seizing the funds of the CBRF and redirecting them for Ukraine-related expenses, including for the reimbursement of thus far approximately US$100 billion in taxpayer-funded borrowing by governments to provide support for Ukraine with another US$100 billion expected to be borrowed in 2023?
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