Can countries steal?
Yes, also rape, murder and all the rest
Tricky Business
The EU and NATO are trying to get tricky.
On 23 October, EU leaders failed to agree on the Commission’s plan to use frozen Russian assets as collateral for a loan to Ukraine.
They said it wouldn’t be “seizure” but of course, it amounts to the same thing.
The European media attempted to rationalize.
The Commission proposes a legally cautious workaround converting about €140 billion of Russia’s frozen reserves into an interest-free reparations loan for Ukraine. Kyiv would repay only when Moscow pays war reparations. Euroclear would hold EU-guaranteed bonds, preserving Russia’s legal claim to the underlying assets.
While no expropriation would occur, the scheme could still be cast as an unlawful constraint on state property. However, it should be seen as a countermeasure rather than expropriation. Under the Articles on State Responsibility, countermeasures allow states to suspend specific obligations owed to a wrongdoing state to restore compliance.
Obviously Russia is never going to pay reparations?
And what happens if Ukraine ceases to exist or votes to join Russia? Russia will still not get its money back from Europe. Possession is nine-tenths of….? This is not armed robbery, more like pick pocketing.
Ordinary people go to jail for stuff like this.
We have repeatedly commented that those are not frozen assets. Those are acts of stealing by these countries. Zakharova . TASS
The frozen assets are about $300 billion, mostly Central Bank reserves. Of this about $58 billion belong to individuals.
Predictably, the Belgians are not happy. Just a few hours ago….
“Why would we thus venture into uncharted legal and financial waters with all possible consequences, if this can be avoided?” De Wever tells the president of the European Commission in the letter. “I will never commit Belgium to sustain on its own the risks and exposures that would arise from the option of a reparations loan.”
Upping the ante, De Wever demands “legally binding, unconditional, irrevocable, on-demand, joint and several guarantees” to cover the €185 billion of the assets and all the potential fallout, such as arbitration costs, interests, investment opportunity loss and even the “quantification of financial impact to the Central Bank of Russia’s credit”.
No matter, Russia doesn’t seem overly worried. After all, it can’t do anything with the money anyway, and it will get it all back somewhere down the road.
One advantage that Russia has paradoxically lies in Western attempts to isolate Russia economically.
When Sanctions don’t bite but kiss
Once again, Russia holds the winning cards.
Foreign firms in Russia (PepsiCo, Metro, Ferrero, Nestlé, for example) had a combined 2024 revenue in Russia of over 2 trillion rubles, somewhere around $50 billion .
The money is stuck here and sanctions and Western policies block dividend repatriation.
Sanctions have actually been good for foreign companies still operating in Russia – and good for the country!
Russian banks use the moneys that foreign corporations have deposited in a way beneficial to the public good, for:
domestic lending
buying Federal Loan Bonds (government debt)
currency operations
“Frozen capital” here isn’t exactly frozen.
The banks earn interest on these deposits, pay taxes, and finance state debt.
Ironies abound.
Foreign subsidiaries may have publicly paused active investment in the Russian economy to avoid trouble at home but ruble deposits offer15 to 16% interest so the money sits in the banks funding the Russian budget and creating financial stability.
The US government doesn’t even think of this since regular bank deposits in the US yield 0.01–0.05%., with the highest rates being about 3%. US companies in the US do not invest using bank deposits – they buy stocks and bonds.
Many of the few foreign firms still operating here principally in the food & beverage, trade and logistics and building materials sectors have experienced 40-150% revenue growth since 2022. In the US, it would have been perhaps 5 percent in the same time frame.
This situation is partly because the mass exodus for foreign companies when sanctions and other measures were imposed, reduced competition. Those who stayed, benefited. And, of course, the Russian economy has been growing much faster than i the US’s.
Where do these “windfall”:profits go? To the “public good”, of course.
Some jurisdictions already tax “excess” retained earnings to stimulate economic activity.
With these higher levels of profit, foreign companies, may see higher taxes and other levies to return profit to the benefit of the economy in general .
Foreign corporations have ended up forced to share capital with the system their governments want to break. As time goes on their liquidity is more and more inextricable from the Russian economy.
But, hey, it’s only $50 billion or so.
Now, if the EU or the US steal Russian assets abroad, the Russians coud theoretically just take full control of these foreign companies and their assets. But most likely not. Russia does not cut off its nose to spite its face as Europe does. I know, I know plastic prosthetics are great …but….
Companies that left Russia still have assets there—about $300 billion. While The EU holds US $250 billion in Russian Central Bank reserves, setting aside the US$50 billion in private funds, it is talking about a using about US $165 million as a loan to the Ukraine. Obviously, if Russia retaliates the EU would lose a lot more than that, with probably more costs down the road with their financial reputation ruined. .
Companies still operating in Russia are likely safe since they pay taxes and contribute to the economy as a whole-- they just cannot repatriate profits home.
Note:
The part of this article about foreign companies in Russia was was stimulated by an article featured on ex US army Stanislav Krapivnik’s telegram channel.
I am not sure where he got his content from – so I did a bit of research to clarify the details. It seems correct especially with added perspective. .
“Sta”, BTW, is another person worth reading.
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Julian, thanks for this article! I didn't think about the trapped capital dynamic! Very instructive read.
You've discovered Stanislav - another interesting perspective - born in Lugansk, to the US as a kid, 10 yrs as an officer in the US Army, returned to Donbass in 2010.