Bound in one chain: why tough financial sanctions against Russia are impossible

Sabirjan Badretdinov, journalist, USA

Having carefully studied the situation, I came to the conclusion that the most severe sanctions - freezing the assets of Russian oligarchs in the West and disconnecting the Russian Federation from SWIFT - are practically impossible.

Why? Let's start with the asset freeze.

1. The main part of the Western assets of Russian oligarchs exists not in the form of real estate or some amount of money invested in a bank, but in the form of minority shares of Western corporations. The freezing of such shares directly affects the interests of these corporations, which are not controlled by Russian oligarchs. Therefore, any court in any European country can easily annul a freezing decision.
2. Very often, the formal owners of the Western assets of Russian oligarchs are figureheads or even whole chains of figureheads. And this is not necessarily just a wife, mistress, children or relatives. It sometimes takes years to investigate all these complex business and related intricacies.
3. Freezing assets requires strong legal grounds, most often a violation of the law of a particular country. And Russian oligarchs, as a rule, are quite law-abiding people.
4. Many oligarchs and their front men have EU citizenship, which makes sanctions against them difficult or even impossible. According to the estimates of Maltese journalists, for example, over the past few years alone, more than 750 Russians, having paid approximately $1 million each, have acquired Maltese citizenship. This automatically makes these Russians citizens of the EU. The same with Cyprus, which also does not skimp on selling its citizenship to wealthy Russians for a slightly larger amount.

What about cutting Russia off from SWIFT?

1. SWIFT is a cooperative society headquartered in Belgium. It is subject to Belgian law. At the same time, it is also controlled by EU structures. This requires the synchronization of Belgian and pan-European laws, which is not always easy. Since SWIFT affects the interests of all European countries, its use as a sanctions tool requires the consent of the majority of EU members. And this is unrealistic. As for the US, they have very limited influence on SWIFT.
2. Europeans fear that the use of SWIFT as a sanctions tool will lead to increased attempts by China and Russia to create their own alternative to this payment system. China already in 2015 created an analogue of SWIFT (Cross-border Interbank Payment System - CIPS), based on its national currency. Russia is working on improving CPFS - System for Transfer of Financial Messages based on the ruble. So far, both of these alternatives are not popular in the world, but some rogue countries are eyeing them, fearing future sanctions against themselves.

Conclusion: even in the event of a new Russian military aggression against Ukraine, the most effective sanctions cannot be applied.

Original is here.