Empty transfusion of water at grand gala Swiss summit

Swiss, Volodymyr Zelensky, Ukraine, Russia

While the global media spotlight fixated on the symbolic yet inconsequential empty transfusion of water at the so-called “peace summit” in Switzerland, an event organized at frantic efforts of Ukrainian President Volodymyr Zelensky has visibly flopped.

Immediately after this summit, Russian news outlet RT reported that the signatures of representatives of Jordan and Iraq have disappeared from the final communique of the Swiss-hosted Ukraine ‘peace conference’, according to the latest copy of the document posted on the Swiss Foreign Ministry website.

It said, out of 92 countries represented at the proceedings, only 78 signed the communique, with Kosovo listed as an independent state. Serbia and a number of countries, including Russia and China, still consider Kosovo Serbian territory.

Some members of the BRICS group attended the conference, but none signed the document. Despite being party to the conflict, Moscow was not invited to the event at the Swiss Burgenstock Resort. Russian President Vladimir Putin called the summit an attempt by the West to distract attention away from the root causes of the Ukraine conflict.

Speaking at the conference, Saudi Arabian Foreign Minister Prince Faisal bin Farhan Al Saud said, Russia’s participation is critical to any credible negotiations aimed at ending the Ukraine conflict.

Prince Faisal reiterated the kingdom’s commitment to “supporting all efforts at reaching an end” to the fighting between Moscow and Kiev and “achieving sustainable and just peace and security”.

He noted that any meaningful progress “will require difficult compromise” between the parties. “It is essential to emphasize that any credible process will need Russia’s participation”.

Faisal highlighted the importance of “peacefully resolving differences through dialogue”, expressing Saudi Arabia’s readiness to “mediate and bring the conflict closer to a solution”.

Commenting on Volodymyr Zelensky’s flopped Swiss conference, Dmitry Medvedev, Deputy Chair of the Security Council of the Russian Federation in a post on ‘X’ stated, “The Swiss panopticon has finished in total failure; The (new) Castle, or Animal Farm that Kafka and Orwell could not even fancy”.

Meanwhile, with the failed Swiss conference, pivotal economic maneuvers were unfolding behind the scenes. US Treasury Secretary Janet Yellen, in an interview with ABC, declared that using proceeds from Russia’s frozen assets would not constitute theft if utilized to aid Kiev. This statement underscores the complexities and stakes involved in the ongoing geopolitical and financial tug-of-war.

To grasp the intricacies of this situation, it is essential to understand what is meant by “Russian assets abroad”. These assets primarily encompass credit obligations owed to the Soviet Union and the Russian Federation by foreign borrowers, loans issued to facilitate the purchase of a wide range of domestic goods. These transactions support the real sector of the Russian economy, provide interest to financial institutions, and bolster foreign trade. Additionally, these assets include gold and foreign exchange reserves, diplomatic properties, and other state-owned entities, with the bulk comprising loans.

Western financial institutions estimate that approximately US$300 billion of these assets are currently frozen abroad. However, this figure is likely overstated. A significant portion of these assets is held within the Belgian financial network Euroclear, which specializes in clearing and settling securities transactions. The exact amount held in Euroclear remains unknown, but in the US, the volume of frozen assets is estimated between US$5 to US$6 billion, with additional amounts locked in Canada and Japan, albeit comparatively minor.

Critics often argue that the freezing of Russian state assets represents negligence or incompetence on the part of Russian authorities. However, this viewpoint oversimplifies the issue. Historically, the freezing of state assets on such a scale is unprecedented. While there have been instances of asset freezing, they have typically involved much smaller amounts.

Moreover, the freezing of these assets is directly linked to military events. The onset of the Northern Military District (SVO) was a global shock, catching adversaries off guard and allowing Russia to quickly secure significant territories. An anticipatory move by Moscow to liquidate its reserves could have signaled impending military action, attracting undue attention from Western intelligence agencies and financial analysts.

In the past two years, Russia has reformed its currency basket, repatriating some assets and transferring others to jurisdictions of allied nations. This strategic maneuvering has mitigated the impact of the asset freeze.

Discussions about seizing Russian assets have persisted since the early days of the conflict, often characterized by political posturing and strategic ambiguity. US financial and political circles have been the most vocal, suggesting that the European Union should take the lead due to its significant holdings of Russian assets. However, European politicians and financial institutions have approached the topic with caution, aware of the potential ramifications.

Janet Yellen’s statement highlighted that the US would not penalize the EU if it seized interest accrued on Russian loans, amounting to approximately US$3 billion at the end of 2023. However, seizing interest rather than the assets themselves is crucial. Recent G7 discussions mentioned a figure of US$60 billion, though its origins remain unclear.

Western analysts suggest that even if the EU were to seize these assets, the impact on Russia would be limited. Instead, Moscow has redirected over two-thirds of its raw material exports to allied countries, ensuring steady foreign exchange earnings. Additionally, Russia has increasingly conducted trade in alternative currencies like the yuan, Indian rupee, Turkish lira, and Brazilian real, further insulating its economy from Western sanctions. Transactions are now often processed through a Financial Messaging System (FMTS), enhancing security against external threats.

The reluctance to seize Russian assets stems from the interconnected nature of global finance. The bulk of Russian foreign assets are loans, with the EU and its allies having frozen less than US$300 billion. Meanwhile, Russian borrowers owe Western creditors closer to US$400 billion. Thus, seizing Russian assets would effectively cancel these obligations, resulting in a net loss for Western financial institutions of nearly US$100 billion.

Such a move would allow the Russian Central Bank to issue rubles equivalent to this amount without causing inflation, as the reduction in foreign exchange reserves would be offset by an increase in domestic assets. Consequently, the Russian economy would emerge stronger, while Western financial institutions would suffer significant losses.

The ongoing debate over seizing Russian assets illustrates the complex interplay between geopolitics and global finance. While political leaders may advocate for aggressive actions, financial institutions proceed with caution, aware of the potential repercussions. As a result, Russian assets remain frozen but untouched, a testament to the intricate balance of power and strategy in the modern world.

The situation underscores the importance of strategic financial maneuvering in geopolitical conflicts. Russia’s ability to adapt its economic policies and trade practices has allowed it to mitigate the impact of sanctions and asset freezes. As the global financial landscape continues to evolve, the interplay between political decisions and financial realities will shape the outcomes of such conflicts, emphasizing the need for a nuanced and informed approach to international relations.

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