Politico Analysis: London City Forever? – Why the UK may never seize Russian assets?

In politics, reality rarely matches rhetoric. And the reality is that Britain will probably never use Russia's money.

Many brave words have been spread since Russia launched its illegal invasion of Ukraine in February 2022. In the British capital - nicknamed "London City" because of its reputation as a playground for Russian oligarchs - Minister Michael Gove has called for the mansions of Russian tycoons to be seized to house Ukrainian refugees, reports the analysis. "Politico".

Others suggested seizing Russian assets in British banks to help finance Ukraine's defense or help rebuild Ukraine after the war.

But two years later, despite the great power, little has been done to seize Russian assets – whether they are owned by the oligarchs or, more realistically, those of the central bank.

Politico reported that they spoke with multiple sanctions lawyers and policy experts, all of whom say there is and never will be a legal basis for seizing frozen Russian money, property or other assets.

"The British government is unlikely to be comfortable setting up a bold new legal order," said Anna Bradshaw, a sanctions lawyer at Peters & Peters.

In the months after the war, Britain froze some Russian assets, with several high-profile announcements, including the forced sale of Chelsea football club to Roman Abramovich.

The government has never released official figures on the total value of Russian assets held in the UK, but it is estimated that £18 billion worth of individual assets have been frozen so far, along with Russian central bank assets in the UK worth around £26 billion. billions of pounds. That's a significant figure, though it's dwarfed by the Russian central bank's €260 billion in assets in the EU.

But policy experts stress that there are big differences between freezing assets and seizing them.

An asset freeze is considered legally proportionate as it is a temporary step. While the authorities may use the profits generated by investing the money, as the EU has agreed to do, the funds themselves will in theory be repaid at some point. Permanently confiscating them, on the other hand, can have huge legal consequences, Politico writes.

British MPs seem to be slowly waking up to that reality.

Harriet Baldwin, a senior Conservative and chair of the influential Commons Finance Committee, told Politico in March that Britain could not "go out and seize people's assets at random" because "that would make us a kleptocratic regime ", says the analysis.

Ministers clearly see a difference between state and personal property.

Earlier this year, UK Foreign Secretary David Cameron renewed calls to seize Russia's frozen sovereign wealth funds – the central bank's investments in assets such as government bonds, currencies and gold.

"At the end of the day, Russia will have to pay reparations for its illegal invasion," Cameron told a crowd in Davos in January, "so why not spend some of the money now instead of waiting for the war to end. and are all the legal disputes over reparations?” the analysis added.

His words went down well with many activists who believe the frozen money should be used to target war victims or help rebuild Ukraine after the fighting ends.

"The UK alone has frozen [billions] of Russian assets, and together with its allies have committed to support the defense, reconstruction and recovery of Ukraine," Rupert Skilbeck, director of REDRESS, a campaign group that has called on the government to seize Russian assets, said in a statement. Skilbeck's attitude.

Beyond the legal issues of outright asset seizures, UK officials are aware that frozen Russian assets could be a useful tool in future peace talks. Billions of pounds of frozen cash, along with prized assets like houses and superyachts, is a pretty good card to play in any conversation.

"If you want to bring Putin to the negotiating table, what other tools do you have left?" said Freya Page, director of global information at Kharon, a sanctions-monitoring analytics firm, and former head of guidance and engagement at Britain's Office for Financial Sanctions Implementation (OFSI).

By contrast, she said, a permanent asset seizure would make such negotiations less likely.

"Asset seizures make sanctions an ineffective tool because they don't do what they were built to do," Page said. "Sanctions are not for punishment. They need to bring people to the negotiating table."

A Western official – who spoke on the condition of anonymity but candidly – ​​also noted the reduced power of sanctions if the money is seized.

"We are introducing sanctions as a measure that is designed to be temporary and respond to a specific situation. But obviously, if you move to foreclosure, it is a permanent act,” the official said.

Whether and how to use Russia's frozen assets is a conversation currently taking place around the world.

Some countries, such as France and Germany, remain unconvinced. But the block is divided. Belgium welcomed proposals to use some of the property's profits to aid Ukraine, while Estonian Prime Minister Kaja Kalas called on the West to seize the properties ahead of the US election. The topic will be on the table at the G7 summit in June.

"In terms of seizing capital assets, the jurisdiction you really need on board – the European Union – is not yet ready to take that step," said Francis Bond, sanctions lawyer at Macfarlanes.

But even if Britain agrees at the G7 to participate in the confiscation of state assets, lawyers believe there is little chance the personal assets will go anywhere, Politico's analysis says.

While all jurisdictions are nervous about the potential legal and financial ramifications of taking the money – they fear it could deter investment in the currency or deter other countries from depositing funds with the central bank – Britain is particularly concerned about the breach of legal norms. .

Governments that seize property privately owned by individuals "begin to rewrite the basic principles that underpin most legal systems when it comes to interfering with property rights and the right to a fair trial," Bradshaw said.

Labor MP Margaret Hodge told Politico that she believes "the financial services sector is putting enormous pressure on the government not to act" on seizing Russian assets.

But that can be preaching to the choir. A sanctions lawyer, who spoke to Politico on condition of anonymity, questioned whether much pressure was needed.

"I don't think [the financial services industry] should be lobbying against it because [the UK government] is obviously incredibly wary of doing this anyway," he said.

At first glance, the upcoming general election in Great Britain presents the perfect opportunity for the opposition Labor Party to make hay with demands that Russia pay the price of its illegal invasion.

Chris Bryant, a senior Labor MP, introduced a bill in February 2023 to force the government to come up with a plan to seize assets within 60 days. It was blocked by the Tories.

Last summer Labor demanded a plan within 90 days from the government on how the Russian assets could be seized - but they have been silent since then.

For the Conservative Party, big talk about taking money from Russia plays well with the electorate, but there is little incentive to take real action given the knotty issue – if the polls are to be believed – it will probably be up to the incoming Labor government to deal with dealt with before the end of the year.

That hasn't stopped some in the Conservative Party from being furious at the slow progress. Ian Duncan Smith, the former Tory leader who now chairs the All-Party Parliamentary Group on Magnetic Sanctions, told POLITICO that his group had "been calling for asset seizures for some time".

He complained: "Progress has been slow and the UK is now lagging behind the US and Canada, and EU countries such as Belgium and Estonia, which are taking steps to confiscate or divert funds raised in Ukraine."

"Property confiscation raises significant legal, political and economic issues that must be addressed, but are not insurmountable with expert advice." The government is dragging this out and needs to catch up with others," added Duncan Smith, Politico reports.

Organizations like REDRESS insist that confiscation of assets is for good and is justified under international law as a countermeasure to the invasion of Ukraine. But lawyers are not convinced, citing basic international obligations from institutions like the European Convention on Human Rights.

They point out that while most Russian oligarchs got rich by snapping up former state assets on the cheap in the chaotic decade after the collapse of the Soviet Union, those who remained on Vladimir Putin's right were able to legitimize their wealth.

"Any country that is a signatory to the European Convention on Human Rights would have significant difficulty confiscating someone's private property unless they have committed a crime, rather than simply because, on a very low bar of evidence, they are thought to be connected to the Russian state," Bond said. the sanctions lawyer from Macfarlanes.

The conclusion many seem to be coming to is that the desire to take Russia's money is overshadowed by complex legal issues.

“As a human being, you want to seize property. But you start to get a little looser with the law. And when you start using the law the way you want, it loses its power,” Page said.

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