U.S. Is Set to Steal Russian Assets. Get Ready for The Russian Blowback.

U.S. and NATO financial sanctions on Russia due to the war in Ukraine have failed miserably.

Russian growth now exceeds U.S. growth. Russia is growing at 5.4% (annualized) while U.S. growth in the most recent quarter was only 1.3%. The Russian debt-to-GDP ratio is a comfortable 17.2% while the U.S. debt-to-GDP ratio is a dangerous 122%.

Unemployment in Russia is only 2.7% while the unemployment rate in the U.S. is 3.9%. The Russian ruble has held steady at about 90:1 for months. Russia has increased its reserves by $50 billion on the rise in the gold price alone. Russia is now the largest exporter of oil to China.

With that track record, one would think the U.S. would reevaluate the impact of economic sanctions. Instead, the West now plans to double-down by stealing over $300 billion of Russian assets held in the form of U.S. Treasury securities.

This plan will formally be unveiled at the G7 meeting in Apulia, Italy on June 13. About $200 billion of the $300 billion in total Russia assets are held in Euroclear, the largest custodian in Europe with over $40 trillion in assets held in custody.

Russia has already said that they will not take this theft lying down. Russia will retaliate by seizing over $300 billion in Western assets now located in Russia including energy infrastructure, telecommunications assets and retail outlets.

Russia will also sue Euroclear for wrongful conversion of assets in one of several Russia-friendly jurisdictions where Euroclear has offices, including Dubai and Hong Kong. Once Russia wins a judgment, it can go anywhere in the world to enforce it. This could throw Euroclear’s $40 trillion custody business into chaos and create a global financial catastrophe.

The U.S. has not learned its lesson about financial sanctions yet. It may have an even harder lesson to learn if it moves ahead with stealing the Treasury securities legally owned by Russia.

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