'Crazy' Biden idea could spark global financial crisis – senior Russian senator

A White House proposal to seize frozen Russian funds and use them to help Ukraine is not only illegal, but could also shatter the entire global financial system, according to Konstantin Kosachev, the vice speaker of Russia’s upper house of parliament.

The senator’s comments come after the New York Times reported on Friday that the Biden administration had intensified talks with US allies to requisition over $300 billion in Russian foreign exchange reserves whch were frozen after the start of the Ukraine conflict.

Writing on Telegram on Friday, Kosachev said there was no legal basis for the “crazy” initiative. He recalled that central banks’ sovereign funds are shielded by a special immunity under customary international law, and no jurisdiction is allowed to impose any coercive measures on them.

Moreover, the senator continued, if the US were to seize Russian assets, it would violate not only international law, but also domestic legislation. He alluded to the 1976 Foreign Sovereign Immunities Act which protects the assets of foreign central banks, adding that many US allies have similar laws.

“International judicial and arbitral practice confirms that it is impossible to impose seizure on funds belonging to central banks and sovereign wealth funds,” Kosachev stressed.

By disregarding this practice, the US is setting a “very dangerous precedent” that will harm the entire global financial system, he stated.

A potential seizure would trigger swift retaliation from Moscow, with the requisition of Western assets frozen in Russia being on the table, Kosachev warned. He emphasized that Washington’s move would be interpreted as a “bad signal” in many countries like China and Saudi Arabia, which would doubt the wisdom of holding their funds in euros or dollars.

As a result, everyone loses. There will be another global financial crisis. [It will be] another step towards (potentially) general chaos and destruction.

Russian officials have repeatedly alleged that the West’s decision to freeze Moscow’s assets constitutes theft. On Friday, Russian Deputy Foreign Minister Sergey Ryabkov also stated that if the US goes ahead with seizing the funds it could lead to a complete breakdown of relations with Moscow, which are already at an all-time low.