Resentments of the “South” hit Ukraine: how non-Western countries oppose the confiscation of Russian assets

The term "Global South" was coined during the Cold War, but it was only perhaps after the start of Russia's aggression against Ukraine that it became so widely used at the international level. Both Ukraine and Russia are competing for the attention and favor of this bloc of countries in Asia, Africa, and Latin America. However, the position of the Global South has been already influencing key processes to counter Russian aggression, and not always in a way that benefits Ukraine.

The confiscation of frozen assets of the Central Bank of the Russian Federation is one of the areas where some processes are already being slowed down due to the position of the countries in this group. Let's try to understand why these countries have taken a pro-Russian position and what Ukraine can do in this situation. Advertisement:

Southern demarche

Russia considers the Global South as a window of opportunity under sanctions.

The activities of Russian proxies in the Sahel region, the BRICS expansion and the increase in trade with China, India and others, even at a loss to themselves, are just part of the Kremlin's actions in this direction. Conversely, Russia hopes that these countries will provide opportunities to circumvent sanctions and offer political support for aggression against Ukraine, including issues related to compensation for damages and the confiscation of Russian assets. In the Global South jurisdictions, there are no significant assets belonging to the Russian Federation that could be subject to confiscation.

We can consider the assets of Russian oligarchs in the UAE or "Russian rupees" in India, but compared to the USD 300 billion in reserves of the Central Bank of the Russian Federation, these are relatively modest resources, and there is no question of their confiscation or blocking. Nevertheless, the question of Russia's responsibility to provide compensation for the damage caused by its actions against Ukraine is a highly sensitive matter for these countries. It seems that the UN General Assembly Resolution ES/11-5 "Furtherance of Remedy and Reparation for Aggression against Ukraine" dated November 14, 2022, may have presented the most significant challenge.

Only 94 countries supported this crucial resolution for Ukraine, and only 44 of them are from the Global South.

Perhaps the most telling statement was made by Kenyan President William Ruto at the Swiss Peace Summit in June this year: "Just as Russia's invasion of Ukraine was illegal and unacceptable, the unilateral appropriation of Russian assets is equally illegal, unacceptable and is a breach of the UN Charter, especially for those of us who believe in freedom, justice and democracy." However, beyond statements and political demarches, representatives of the Global South are also acting behind the scenes on the issue of confiscating the assets of the Central Bank of the Russian Federation.

And they very often act in favor of Russia.

"Hybrid Counteraction"

At the beginning of this year, the European Union and the Group of Seven (G7) were actively engaged in working on solutions to use Russian assets for the benefit of Ukraine. At this stage, various options for the content and goals of the relevant decisions were still being considered, including confiscation, transfer of profits from these assets to Ukraine, or a "reparations loan". At the same time, however, there were signals that countries in the Global South, including China, Indonesia, and Saudi Arabia, had privately asked the EU to resist pressure and not confiscate these assets.

The positions of these countries were not officially announced, but insiders cited "the Kremlin's request" and fears of setting a precedent that could be applied to them in the future as reasons for this step. Subsequently, some details came to light that demonstrated that

representatives of the Global South were not limited to requests, but were also putting pressure on the EU. In particular, Bloomberg informed that Saudi Arabia had privately hinted to EU representatives that it would sell off European debt if the G7 decided to confiscate the assets of the Central Bank of the Russian Federation.

It is known that the central bank of the Kingdom holds net foreign reserves worth billions of dollars. These are bonds of European companies, treasury securities of EU member states, and other assets worth about USD 445 billion held by the central bank of the Kingdom. If the Arabs were to sell all or most of these assets, it could significantly reduce the price of bonds and increase the interest rates that issuers would have to pay on new debt.

However, Riyadh denied these statements: The Ministry of Finance of Saudi Arabia assured that the country is ready for an open dialogue to achieve a result that is beneficial to all parties and the international system as a whole. Russia also uses the jurisdictions of the Global South for hybrid counteraction to the idea of confiscating assets in the interests of Ukraine. In particular, in South Africa, a court blocked the assets of the local Google office because it failed to comply with a Moscow court decision to restore the Orthodox SPAS TV channel on YouTube.

These decisions are a significant challenge, though they are currently an interim solution only aimed at posing a kind of "strategic dilemma" to our allies regarding asset confiscation. If certain decisions are made or implemented regarding sovereign or private Russian assets, Russia is likely to apply political pressure for similar steps in friendly jurisdictions to create even more chaos. The absence of a reparations clause at the Peace Summit indicates that this issue is still highly sensitive, and there are a number of other reasons for this besides sympathy for Russia.

Historical traumas

It seems that the idea of using Russian assets is also unlikely to be approved by representatives of the Global South, given that a number of its countries have previously faced similar measures.

The United States imposed sanctions on Cuba's assets in the 1960s due to Fidel Castro's development of a repressive communist dictatorship, rapprochement with the Soviet Union, and expropriation of American assets on its territory. The latest official data, as of 2005, indicates that the U.S. Treasury Department reported blocking approximately USD 300 million in Cuban assets.

In turn, the United Kingdom froze USD 1.5 billion of Argentina's sovereign assets in its jurisdiction the day after the latter landed on the Falkland Islands in 1982.

In 2021, immediately after the Taliban came to power, the United States announced freezing of Afghanistan's sovereign assets. On 14 September 2022, the U.S. Treasury Department and the State Department announced the creation of a fund for the benefit of the people of Afghanistan, the so-called "Afghan Fund", to which interest from the placement of the Central Bank of Afghanistan's assets on deposit accounts was transferred, amounting to USD 36 million.

The experience of the UN Compensation Commission in compensating Kuwait for losses due to the invasion and occupation of part of its territory by Iraq in 1990-1991 is also unlikely to persuade Baghdad and its allies to support similar ideas regarding Ukraine.

Is there a way out?

Thus, Russia has a distinct advantage in the struggle for the favor of the Global South, including the issue of reparations for Ukraine. However, this does not mean that these countries are unconditionally loyal to Russia. They primarily protect their own interests.

Therefore, if they can be convinced that some form of support for Ukraine, including the confiscation of Russian assets, will not harm them or will align with shared interests, it is likely to gain their support. The same successful experience of the UN Compensation Commission in the case of Iraq is evidence that the united international community is able to make the aggressor pay for its illegal actions, a fact that is important to every modern state to some extent. Moreover, some experts believe that support, in particular from the Global South, for compensation for war damage to Ukraine at the expense of Russian assets is hampered by countries' concerns about the consequences of such a step for international law and the financial system.

Much work has already been done to address these concerns and debunk them. Therefore, the Ukrainian government and civil society shall make every effort to convey to these countries that it is necessary not only to recognize the illegality of Russia's actions, but also to hold it accountable, including in the form of compensation for damages. Furthermore, the decision on confiscation is not intended to set a dangerous precedent, but to prevent other precedents of aggression, which will benefit the whole world, including the countries of the Global South.

Ivan Horodyskyy, lawyer, cofounder of the Dnistryanskyi Center
Sofia Kosarevych, analyst of the Dnistryanskyi Center

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