Why the West’s new anti-Russia sanctions are a dangerous game changer — RT World News
The creation of Russian forfeiture mechanisms will have long-term consequences for both the West and the whole world
Via Ivan TimofeevThe Valdai Club Program Director & is one of the leading experts on Russian foreign policy.
Since the beginning of Russia’s military offensive in Ukraine, Western countries have frozen the assets of Russian state and private organizations under the so-called “prevent sanctions.” They also discussed the option of confiscating them and transferring the proceeds to Ukraine. Currently, the only country with the necessary legal mechanism for this is Canada. This would make it the first country in the world to carry out the procedure.
How does this system work? What does its first attempt at execution look like, and what are the possible consequences after that?
Prohibited techniques and their users
In countries with financial sanctions, loss of control of assets has become quite common. Preventive sanctions have been used frequently by US officials for decades. The EU, Switzerland, Canada, Australia, New Zealand, Japan and several other countries have also adopted this practice. Russia and China have the power to impose sanctions, but Moscow and Beijing rarely use it. For the West, however, this form of economic warfare has become the norm.
Along with a ban on financial transactions with individuals and legal entities included in the blockaded list, the sanctions also include freezing their assets in the jurisdictions of the countries of origin. chant. This means that an embargoed person or entity can no longer use their bank accounts, real estate, and other assets. Since February 2022, Western countries have imposed such sanctions on more than 1,500 Russian individuals and entities. Considering the substructures, the number is even larger. The amount of assets frozen is huge, including $300 billion in gold and foreign exchange reserves. And that’s not to mention the amount of Russian-owned assets worth $30 billion frozen. G7 countries. However, freezing assets is not the same as seizing assets. In the first case, the respondents could not dispose of their property, but formally it was still their property. At some point, the sanctions can be lifted and the person can regain the right to use his or her property. Even after years of restrictions, the opportunity to recover assets remains.
Some Western officials have voiced support for confiscating frozen assets and handing them over to Ukraine. The forfeiture mechanism has existed for a long time. For example, property may be confiscated by court order as part of a criminal crackdown on those who violate punitive laws. However, this procedure is hardly applicable to mass seizure of assets. Blocking sanctions is a political measure and does not require proof of guilt like a hypothetical criminal trial. In other words, hundreds of Russian officials and businessmen have been blacklisted for supporting a special military operation but have not committed any criminal offenses worthy of confiscation. Sanctions have prompted the search for crimes such as money laundering or other illegal activities. But the amount of money raised in this way is small compared to the volume of assets frozen. To seize and transfer the frozen assets, a different plan is needed.
Unique Canadian experience
Canada was the first country to legally implement a forfeiture mechanism. The 2022 revision of Special Economic Measures Act grants the authorities of Canada the power to seize property in a country owned by a foreign country, any person or entity located in that country, as well as a citizen of that foreign country who is not a resident of that foreign country. Canada. Such measures may be applied if “a serious breach of international peace and security has occurred that has resulted in or is likely to lead to a serious international crisis.” The final decision is made by a judge after receiving the corresponding petition from a relevant representative of the executive authorities. Accordingly, the law provides that the competent authorities, at their sole discretion, may decide to transfer the proceeds of the confiscated property to a foreign country affected by the serious breach. international peace and security, towards the restoration of international peace and security. , and to compensate victims of serious violations of international peace and security, serious violations of human rights or acts of corruption.
The Canadian property of Granite Capital Holding Ltd. of tycoon Roman Abramovich will be the first to fall victim to the new law. According to a declare by the Canadian authorities, it was valued at $26 million. Roman Abramovich was in Canada blocked people list, which means his assets are frozen and any dealings with him are prohibited. The assets of the Russian businessman will now be confiscated and can be transferred according to the needs of Ukraine. The value is relatively small, but it can be used to set the movement mechanism. The next steps can be much larger in scale.
Other countries are likely to follow Canada’s example. America talk about the implementation of a similar law in April 2022, but so far nothing has been done at the legislative level. In the EU, this procedure has also not been legalized, although Article 15 of Regulation 269/2014 compel Member States to develop regulations on confiscation of property acquired in violation of the sanction regime. The concept of “violation” can be interpreted broadly. For example, Article 9 of the Regulation obliges frozen Russian individuals to provide their asset accounts to the EU authorities within 6 weeks. Violation of this requirement may be considered a breach of sanction regulations.
What conclusions can we draw?
For now, we can note some consequences of the Canadian government’s initiative.
First, it is clear that foreclosure risks exist and they are not dormant. The current situation is a red flag for unsanctioned Russian individuals and companies that own assets in Western countries. They need to understand that their assets can be seized, not just frozen. This risk will certainly be considered by foreign investors and property owners in countries at risk of being targeted by future Western sanctions. This includes nationals of China, Saudi Arabia, Turkey and other countries. While it is unlikely to cause a mass exodus of the citizens of these countries and their possessions from Canada and other Western countries, warning signals will be heard.
Second, Russia is likely to take retaliatory measures. Western companies are rapidly withdrawing their assets from Russia. Canadian businesses were not widely represented in Russia even before last year. However, if confiscation practices become common in the West, Russia could also seize the remaining Western businesses on its territory. So far, Moscow has been cautious about freezing foreign assets. While the US, EU and other Western countries actively block Russian individuals and their assets, Moscow has mainly responded with visa sanctions. However, if the Russian asset confiscation continues, it could prolong the Kremlin’s patience and prompt it to retaliate.
Ultimately, the practice of foreclosure changes the very concept of Western sanctions. The latter implies that the “change of behavior” of a sanctioned individual will result in the lifting of sanctions and the recovery of assets. The practice of asset freezing corresponds to this concept. However, the idea of confiscation completely negates it. As of today, sanctions are becoming a completely destructive mechanism.