Russia warns Europe: if you take our assets, we have a response that will hurt

An ally of President Vladimir Putin warned Europe on Tuesday that Russia has already drafted legislation to retaliate if nearly $300 billion of Russian assets were seized by the West and used to help Ukraine.

After President Vladimir Putin sent troops into Ukraine in 2022, the United States and its allies prohibited transactions with Russia’s central bank and finance ministry, blocking around $300 billion of sovereign Russian assets in the West.

Top officials in the United States want to seize the assets to help support Ukraine, though some bankers and European officials are worried that simply taking the assets would create a dangerous precedent.

The U.S. House of Representatives passed legislation on Saturday including a bill with a provision that would allow the confiscation of Russian sovereign assets, though the lion’s share of the assets are in Europe.

“We also have a prepared answer,” Valentina Matviyenko, the speaker of the Russian upper house of parliament, was quoted as saying by state news agency RIA. “We have a draft law, which we are ready to consider immediately, on retaliatory measures.”

“And the Europeans will lose more than we do,” Matviyenko, who is a member of Russia’s powerful Security Council, said.

Matviyenko did not give specifics on what the response would be to the seizing of Russian assets which is still under discussion in the West.

One option being discussed by the West is to confiscate the income on the underlying assets without taking the actual asset itself.

Putin says the West unleashed what he casts as an economic war against Russia but has touted both the resilience of the Russian economy, which grew 3.6% last year, and the failure of sanctions of stop Russian trade.

The Kremlin has repeatedly said that any seizure of its assets would go against all the principles of free markets which the West proclaims and that it would undermine confidence in the U.S. dollar and euro while deterring global investment and undermining confidence in Western central banks.

Russia has said it will challenge any confiscation of its assets in the courts.

Some Russian officials have suggested that if Russian assets are confiscated then foreign investors’ assets stuck in special so-called type “C” accounts in Russia could face the same fate.

It is not clear exactly how much money is in these accounts.

The speaker of the lower house of the Russian parliament, Vyacheslav Volodin, said on Monday that Russia had grounds to seize Western assets after the move by the U.S. House of Representatives.

Volodin said that of the $280 billion of Russian assets frozen abroad, only $5 to $6 billion was in the United States while about 210 billion euros ($224 billion) was in the European Union.