Russia's single & greatest mistake in its war with Ukraine - failing to anticipate the rapacious confiscation of its overseas assets by Western "highway robbers"

Military Watch (extracts):





While the Russian Rouble initially crashed under Western sanctions, reports that Moscow was considering selling oil to European countries in the currency led to its value quickly rising. One aspect of Russia’s performance, however, appears to have been a major and seemingly obvious error which is likely to cost the country heavily.

Russia has throughout much of the 2010s run budget surpluses, meaning the treasury’s revenues exceed the state’s expenditures and allowed it to create reserves much of which were stored in foreign currency or precious metals. As of February 2022 these amounted to $643 billion - or close to a decade worth of military spending - which provided a key means of providing stimulus to the economy should it come under Western pressure.

While these reserves remained a major asset for Russia that strengthened its position considerably in the case of confrontation with the West, Moscow made a key error of leaving the bulk of its reserves - some $300 billion - in banks overseas that could be affected by Western economic warfare. The result was that Western powers quickly froze over half of Russia’s hard earned reserves, leaving Moscow in a far weaker position than it would have been in otherwise and significantly reducing its ability to reinvigorate its economy with spending.

Western powers freezing Russian reserves was far from difficult to predict, with multiple precedents set against countries which had previously been targets of Western economic warfare.

The Bank of England, for example, has for years frozen almost $2 billion worth of Venezuelan gold reserves, which is expected to remain the case until a Western aligned government is returned to power in Caracas.

Britain has also frozen Iranian funds for over 40 years, which Tehran may well never see returned to it. Similar cases can be seen across the Western world, including not only freezes but also outright appropriations of adversaries’ assets from Canadian government confiscation and sale of Iranian government owned properties to Belgium’s confiscation of Libyan government funds.

Russia has not only seen a long period of high tensions with the West since 2014, but also had several months to prepare for a possible escalation of conflict over Ukraine as tensions with the West began to worsen from October 2021. The seemingly grave error was one committed not only by the Russian government, but also by the country’s elite who were very heavily invested in hostile Western countries resulting in vast sums and assets, ranging from luxury properties to yachts, being seized by Western governments in a massive and largely self inflicted loss of wealth. This alone amounted to tens of billions of dollars, with more Western countries notably Poland poised to seize more real estate and other assets owned by Russians.

Russian investments across the non Western world, from Thailand and Indonesia to Latin America and Africa have seen no similar moves against them.

There remains a significant possibility that Russian assets which are frozen and in Western hands will never be returned. Western powers may well claim that appropriating them serves as compensation for Russian economic retaliation, or provide the funds to the Western aligned Ukrainian government as war reparations should Western courts deem this fitting. 

Canada's sale of Iranian assets to compensate victims of terror attacks, despite a very tenuous link to Iran, is one of many notable precedents.

Russia will have not only denied itself a large portion of its wealth, but also enriched its adversaries should this be the case. 

The targeting of Iran, Venezuela, Libya and other Western adversaries provided multiple warnings of the consequences of leaving assets within Western reach at times of high tensions, and Russia’s failure act on these is very likely to be its greatest single error of the Ukraine war.