Reuters, 2/21/25

Summary

-Russia may concede frozen assets for Ukraine reconstruction, sources say

-Russia will demand some of the funds for territories it controls, sources says

-US and Russian officials met in Riyadh, not clear if frozen funds discussed

MOSCOW, Feb 21 (Reuters) – Russia could agree to using $300 billion of sovereign assets frozen in Europe for reconstruction in Ukraine but will insist that part of the money is spent on the one-fifth of the country that Moscow’s forces control, three sources told Reuters.

Russia and the United States held their first face-to-face talks on ending the Ukraine war on Feb. 18 in Saudi Arabia and both U.S. President Donald Trump and Russian President Vladimir Putin have said they hope to meet soon.

After Putin sent troops into Ukraine in 2022, the United States and its allies prohibited transactions with Russia’s central bank and finance ministry, blocking $300-$350 billion of sovereign Russian assets, mostly European, U.S. and British government bonds held in a European securities depository.

While discussions between Russia and the United States are at a very early stage, one idea being floated in Moscow is that Russia could propose using a large chunk of the frozen reserves for rebuilding Ukraine as part of a possible peace deal, according to three sources with knowledge of the matter.

Swathes of eastern Ukraine have been devastated by the war and hundreds of thousands of soldiers killed or injured on both sides while millions of Ukrainians have fled to European countries or Russia. A year ago, the World Bank estimated reconstruction and recovery would cost $486 billion.

The sources spoke to Reuters on condition of anonymity due to the sensitivity of the discussions and because discussions are only preliminary. The Kremlin declined to comment.

The idea that Russia may agree to using the frozen money to help rebuild Ukraine has not been previously reported, and may give an insight into what Russia is willing to compromise on as Moscow and Washington seek to end the war, at a time when Trump is pushing for U.S. access to Ukrainian minerals to repay Washington’s support.

Russia’s main demands to stop the fighting include a withdrawal of Kyiv’s troops from Ukrainian territory Moscow claims and an end to Ukraine’s ambitions to join NATO. Ukraine says Russia must withdraw from its territory, and wants security guarantees from the West. The Trump administration says Ukraine has unrealistic, “illusionary” goals.

Reuters could not establish whether the idea of using the frozen funds was discussed between Russia and U.S. counterparts in the Saudi meeting.

The Group of Seven stated in 2023 that the Russian sovereign funds will remain frozen until Russia pays for the damage it inflicted in Ukraine. Trump has said he would like Russia to return to the G7, a grouping of wealthy nations.

Russian Central Bank Governor Elvira Nabiullina said on Thursday the bank was not part of any talks on lifting sanctions or unfreezing of Russia’s reserves.

Russia has previously said plans to use the funds in Ukraine amounted to robbery.

The Ukrainian foreign ministry and the White House did not immediately respond to requests for comment. The British Foreign Office declined to comment.

“Nothing about Ukraine and the EU can be decided without Ukraine and the EU,” said Anitta Hipper, a spokesperson for the European Commission. She said the EU and member states were helping Ukraine strengthen its position ahead of any talks, including with a new round of sanctions on Russia.

Renaissance Capital lead analyst Oleg Kouzmin said the differences between the United States and Europe, which controls most of the assets, would complicate a lifting of the freeze.

“It would require the European side to fully back the current stance of the U.S. aimed at dialog with Russia,” Kouzmin said, calling such a scenario “very optimistic”.

TWO THIRD SPLIT?

Russia’s frozen sovereign assets have been the subject of intense debate in the West with some proposing it be essentially given to Ukraine through a complex “repatriation loan”, opens new tab.

One source with knowledge of the discussions in Moscow said that Russia could accept up to two-thirds of the reserves going to the restoration of Ukraine under a peace deal, provided there were accountability guarantees.

The rest could go to the Russian-controlled territories in eastern Ukraine that Russia now considers to be part of Russia, said the source.

Another source with knowledge of discussions said that Moscow would agree to using the money to rebuild Ukraine but that it was too early to say what the possible division might be. Two sources stressed that it was important to discuss which companies would get future contracts for reconstruction.

A different source, close to the Kremlin but not directly involved in the discussions, said that Russia would still demand the lifting of the freeze on the assets as part of gradual sanctions relief.

Several Western officials, especially in the German government and European Central Bank, have been reluctant to simply confiscate sovereign reserves, warning that such a move could face legal challenges and undermine the euro as a reserve currency.

Russian officials have repeatedly warned that the state confiscation of assets goes against free market principles, destroys banking security and erodes faith in reserve currencies. In retaliation, Russia has drafted legislation to confiscate funds from companies and investors from so-called unfriendly states, those that have hit it with sanctions. The bill has not yet been voted in Russia’s State Duma lower house.

EUROPEAN FREEZE

At the time the assets were frozen, Russia’s central bank said it held around $207 billion in euro assets, $67 billion in U.S. dollar assets and $37 billion in British pound assets.

It also had holdings comprising $36 billion of Japanese yen, $19 billion in Canadian dollars, $6 billion in Australian dollars and $1.8 billion in Singapore dollars. Its Swiss franc holdings were about $1 billion.

Russia reports its total gold and foreign exchange reserves as around $627 billion, including the frozen funds. The value of Russia’s frozen assets fluctuates according to bond prices and currency movements.

The bank’s biggest bond holdings were in the sovereign bonds of China, Germany, France, Britain, Austria and Canada. Russia’s gold reserves were held in Russia.

Around 159 billion euros of the assets were managed by Belgian clearing house Euroclear Bank as of early last year, Euroclear has said.

While the freezing of the funds has angered Moscow, some of Russia’s most outspoken war hawks have previously acknowledged Russia may eventually part with the frozen reserves, provided that the controlled territories stay within Russia.

“I propose a solution. They pay this money towards our purchase of those territories, those lands that want to be with us,” said Margarita Simonyan, head of the Russian state broadcaster RT, in 2023.

The Russian-controlled territories of Ukraine account for about 1% of Russia’s gross domestic product, but some economists believe that their share could grow quickly if they remain with Russia when the war ends.

The regions already provide around 5% of Russia’s grain harvest.

By Kyle Anzalone, Libertarian Institute, 2/24/25

President Donald Trump’s Middle East Envoy, Steve Witkoff, explained that talks on ending the Ukraine war are in the Istanbul Protocol Agreement framework. That protocol refers to a deal that was nearly signed between Kiev and Moscow that would have ended the war in Ukraine within a few months. 

Witkoff gave multiple interviews on Sunday, discussing ongoing negotiations about the Ukraine War. He told CNN that a deal was “very close” and could be completed in the coming week.

Witkoff said the current talks follow the Istanbul Protocol Agreement. “There were very, very what I’ll call cogent and substantive negotiations framed in something that’s called the Istanbul Protocol Agreement.” He continued, “We came very, very close to signing something, and I think we’ll be using that framework as a guidepost to get a peace deal done between Ukraine and Russia, and I think that will be an amazing day.”

In March and April 2022, the first months after the Russian invasion, US allies Israel and Turkey hosted talks between Ukraine and Russia. In Istanbul, the two sides agreed to the outline of an agreement. 

Under that deal, Russia would withdraw from territory seized after the invasion in exchange for Ukrainian neutrality and limits on its military. In addition, Kiev would recognize Crimea as Russian and its Western backers would lift sanctions on Moscow. 

However, Washington and London did want to end the war so soon after the invasion and promised Kiev to provide Ukraine with all the support it would need to win the war. At the time, some members of NATO saw the war as an opportunity to use Ukraine to weaken Russia. 

In April 2022, then-UK Prime Minister Boris Johnson traveled to Kiev and informed Ukrainian President Zelensky that he would not receive Western support if he signed the deal with Russian President Vladimir Putin. 

In the following two years, Russia has annexed four additional regions of Ukraine. It is unclear how the current deal would differ from the initial Istanbul Protocol Agreement, as Putin has said Russia will not return annexed territory. Since talks broke down, at least hundreds of thousands have died in the conflict, with President Trump asserting the true death toll is in the millions. 

On Monday, Trump indicated he would be willing to lift sanctions on Moscow, or at least begin to normalize the economic relationship between the superpowers, as part of a deal to end the war in Ukraine. “I am in serious discussions with President Vladimir Putin of Russia concerning the ending of the War, and also major Economic Development transactions which will take place between the United States and Russia,” Trump wrote on Truth Social. “Talks are proceeding very well!”

US and Russian offices are preparing to meet for another round of talks later this week.

YouTube link here.

Mises Wire, 12/12/24

[Provoked: How Washington Started the New Cold War with Russia and the Catastrophe in Ukraine, by Scott Horton, The Libertarian Institute, 2024; 690 pp.]

“A fox knows many things, but a hedgehog knows one big thing.” Scott Horton is the liberty movement’s foreign policy hedgehog, endeavoring to convince the American public of one essential truth: the folly of war. But within that sphere, Horton is a fox, weaving an encyclopedic knowledge of various conflicts into an elaborate and convincing tapestry that indicts elites, intellectuals, the military-industrial complex, and—with characteristic vitriol—neoconservatives in pushing the US toward unnecessary wars.

Provoked: How Washington Started the New Cold War with Russia and the Catastrophe in Ukraine, fits this mold to a tee—not because Horton contorts facts to a preconceived narrative. Rather, because it is often the same people pushing conflict after conflict who, unsurprisingly, resort to the same, well-worn playbook. Horton’s tome is riveting, from beginning to end. Here, I will focus on the early post-Cold War years, since this part of the story is oft-neglected in contemporary debates about the origins of the Ukraine war.

With the closing of the Cold War, and the USSR dissolving, the US faced a crisis of success: what use is the NATO military alliance without the Soviet enemy to align against? More broadly, what grand strategy should the US adopt now that containing communism was obsolete? For neoconservatives, whose answer post-Cold War was benevolent global hegemony, the solution was to adapt NATO. NATO must gradually absorb more European nations, while leaving Russia out in the cold—contained and encircled, in an even worse position than during the Cold War. NATO must expand its mission to keep European peace and expand Western democracy, or wither on the vine.

From George H.W. Bush to today, the record meticulously compiled by Horton demonstrates that US and other Western leaders communicated to Russia leaders and officials that NATO would not expand east—and could even allow for Russian membership in NATO. Various efforts like the Partnership for Peace and the Organization for Security and Co-operation in Europe were promoted to foster this impression that Russia would be included in European affairs, alliances, and institutions, rather than these structures aligning against them. All the while, these same US and Western leaders took virtually the opposite positions internally, with the result that the US willfully misled the Russians. The exact internal and external postures waxed and waned over the years, but this ultimate pattern held firm. This was even though, all along, Russian officials warned about how they and the Russian people would react to NATO advancing east. What we see is, in terms with which Americans are well-familiar, “a long train of abuses and usurpations, pursuing invariably the same Object.”

It began with George H.W. Bush, who promised Mikhail Gorbachev, after the fall of the Berlin Wall as the Soviet Union careened towards collapse, that the US would not take advantage of the situation. This was also reflected in a NATO resolution on June 7, 1991. Bush and his advisors promised that NATO would not expand if the Soviet Union would withdraw and allow German reunification. The 1990 settlement would only specify that the US would not put troops in East Germany, a nuance which Russia hawks have exploited to argue there was no promise not to expand NATO. But this does not fly. Horton asks the rhetorical question: what sense would it make for the Soviet Union to extract a promise not to put troops in East Germany, if the US had a free hand to bring the rest of Eastern Europe into a military alliance? This agreement only makes sense on a backdrop of agreeing not to expand NATO.

The sins of the Clinton years were legion. In the early 90s, the US sent economists from the Harvard Institute of International Development to Russia to enact what came to be called a “shock therapy” economic policy. It was so badly designed and had such poor outcomes that many Russian thought it must be deliberate. Unsurprisingly, this did not dispose ordinary Russians to view the West favorably. Throughout the decade, Clinton and his advisors duplicitously offered Russia promises that a “Partnership for Peace” process would be pursued rather than NATO expansion—and that NATO would lose its military character—all the while planning to expand NATO.

The Clinton administration was heavily involved in the Balkans wars of Bosnia and Kosovo, which present strong cases against “humanitarian” intervention. The result of Bosnia was that NATO proved itself capable of fulfilling a new mission, while the US solidified itself at the head of European affairs, each of which were necessary for subsequent NATO expansion. Kosovo further solidified NATO’s new role on the continent—even intervening in civil wars—while the bombing campaign against Serbia convinced Russians that the US was an aggressive, ruthless great power, who would violate international rules when it suited them. The US engaged in this aggressive war, in violation of the UN Charter, without approval of the UN Security Council (on which Russia sat). So much for the liberal rules-based international order. The US’s frequent remaking of the rules was a frequent complaint of Russia, including during the Iraq War.

Moreover, when Russia went to war with break-away Chechnya, Clinton’s CIA and US allies supported Chechen rebels and separatist mujahideen fighters fighting on Chechnya’s side against the Russians, with the goal to disrupt an existing Russian oil pipeline running through Chechnya. This, too, Putin cited when invading Ukraine. (If this were all not bad enough, Horton shows how the Clinton administration supported the bin Ladenite terrorists in the Balkans wars and in Chechnya. Indeed, more than half of the September 11 hijackers were involved in these wars in the Balkans and Chechnya—often both.)

Putin’s rise was itself a consequence of the Clintonian interventions in the 1990s: from the “shock therapy” economic policy, to helping Yeltsin get reelected in 1996, to Kosovo and Chechnya. As Horton points out, ironically, Putin invoked the Kosovo precedent of intervening in a civil war to “protect” an ethnic minority to justify invading Ukraine. In one stunning example from the Kosovo war, Horton recounted how the Clinton administration ordered the bombing of a Serbian TV station. These actions still influence Putin’s thoughts about the West today. Putin’s strike on a TV tower in Kiev in February 2022 likely called back to that conflict.

The NATO-Russia Founding Act of May 1997 was another milestone in US duplicity toward Russia. It assured that NATO would not deploy nuclear weapons or “substantial” troops to new NATO nations’ territories. Importantly, the Clinton administration misled Russia into thinking the Founding Act would give Russia a genuine role in NATO deliberations—although it would not have a say within the NATO alliance itself—when, in the words of Clinton advisor Strobe Talbott, the US’s view was that “all we’re really promising them is monthly meetings.”

Throughout Clinton’s term, the Clinton administration fed Russia the lie that claimed NATO’s mission was becoming political, rather than military, so agreeing not to expand NATO would be admitting that NATO’s mission was to contain Russia. He even said he would leave open the possibility of Russia entering NATO. But Horton shows they had no intention to do any of this. To make matters worse, in July 1997 NATO and Ukraine signed an agreement that would provide for training Ukraine’s military and improve their interoperability with NATO, and in August 1997 planned a military exercise involving several former Warsaw Pact states and Soviet republics to simulate US military intervention in an ethnic conflict in Crimea.

No, this was not all. The US tried to cut out Russia from Caspian Basin oil by refusing to run a pipeline from Azerbaijan through Russia, pushing it to a Western route through Turkey instead. The US also backed the GUAM (Georgia, Ukraine, Azerbaijan, and Moldova) grouping to “speed European integration and exclude Russia influence from the South Caucasus,” according to Horton, which Russia strongly opposed, calling it an “Axis of Evil” in 2005. The Clinton administration also violated Bush and Gorbachev’s Treaty on Conventional Armed Forces in Europe in 1999, incredulously claiming that the “permanent US military bases in Bulgaria and Romania” were actually just temporary.

The close of the Clinton years began a wave of “color revolutions” in Russia’s backyard. The key thing about these “revolutions” is that they are heavily funded and supported by foreign governments or NGOs, such as George Soros’ groups. Rather than directly or covertly overthrow an existing regime, these organizations operate “above board,” meaning they avoid specifically endorsing candidates—since that would be illegal—and instead fund and assist groups that promote more generic, non-partisan efforts like “democracy.” In context, of course, their activities are geared to “benefit . . . a favored candidate or party.” A favorite tactic is using “parallel vote tabulation” or exit polls, which are used to dispute official election results. The dispute typically spills over into street demonstrations with the goal of ousting the ostensible victor.

The “revolutions” began in Serbia in 2000 with the ousting of Clinton’s bête noire Slobodan Milošević. As Horton sardonically comments, this culminated in the “sacking and burning of the [Serbian] parliament building in what would surely be called a violent insurrection by American Democrats if they had not been behind it.” Numerous other states would be targeted for color revolutions by the US and its Soros-backed NGO allies over the next decades.

Incredibly, this only begins to scratch the surface of these early, post-Cold War provocations toward Russia that Horton documents, let alone the follies and misdeeds that occurred during the George W. Bush presidency and thereafter. Horton has persuasively made the case that the US provoked Russia over the course of three decades, knowing that Russia would respond with hostility toward NATO expansion. Yet, with reckless abandon, US leaders and officials pushed on, achieving their wildest dreams of NATO expansion and setting their sights on what was always their crown jewel—Ukraine. It did not have to be this way, and it still does not. But time is ticking. Defying expectations, President Biden manages to reach new heights of absurdity in his escalatory policy toward Russia, ticking off a box on Zelensky’s deadly five-point “peace” plan. The war cannot end soon enough.

By James Corcoran, Moscow Times, 1/31/25

If Donald Trump — by sheer audacity or dumb luck — manages to broker a ceasefire in Ukraine, brace yourself. It will not just be diplomats celebrating. Western corporate executives will break out the champagne too.

The ink on any peace deal will have barely dried before Western multinationals and expats rush back into Russia, chasing profits with little regard for geopolitical or ethical considerations.

Keith Kellogg, Trump’s special envoy for the Russo-Ukrainian war, has already floated a plan that ties sanctions relief to a phased peace process. Under his proposal, some sanctions would be eased in exchange for a ceasefire, a frozen front line and the establishment of a demilitarized zone in Ukraine. Full sanctions relief would come later if Russia signs a comprehensive peace agreement. But even the prospect of a partial rollback will be enough to tempt Western businesses back.

The truth is that many Western companies never really left Russia. Sure, there were dramatic press releases and highly publicized exits when the invasion began three years ago. But a closer look reveals that a sizeable chunk of the business world stuck around or left loopholes wide enough to drive a tank through.

European lenders like Raiffeisen Bank and UniCredit still have substantial operations in Russia, quietly raking in profits. Drinks giant Pepsi did not shutter its business entirely, either.

For those that did leave, many structured their departures with buyback clauses — an escape hatch that would allow them to swoop back in as soon as the political climate softens.

If a fragile peace holds in the coming months, these dormant contracts and silent commitments will suddenly spring to life. Expect a stampede of brands eager to reclaim market share, from luxury goods to fast food and financial services. After all, Russia is a lucrative market of 140 million people and morality has a way of dissolving when there is money to be made.

A ceasefire alone could spur activity, depending on how much geopolitical risk companies are willing to stomach. If negotiations result in a fragile truce with no clear path to a broader peace deal, most Western multinationals will likely hold back — at least publicly. Legal and reputational risks will remain high, especially if sanctions stay intact and the conflict drags on.

However, companies that never fully exited, such as confectionary giant Mars Inc and hotel chains Hilton and Marriot, would likely ramp up operations behind the scenes, cautiously testing the waters for a broader return. Others might start lobbying Western governments for sanction relief, positioning themselves for a gradual return.

What is more troubling is how the collapse of environmental, social and governance (ESG) principles in recent years will embolden these corporations. ESG was supposed to be the north star guiding companies toward ethical, sustainable operations.

But in practice, it has become a marketing too — something to tout on investor calls while being quietly undermined behind closed doors. Whether it is oil companies releasing commercials about green energy doubling down on their commitment to fossil fuels or tech giants cozying up to authoritarian regimes, ESG has shown itself to be toothless.

Returning to Russia would be the ultimate test of this. For a brief moment after the invasion, Western companies appeared to care about more than just optics, pulling out of Russia to signal solidarity with Ukraine. But as the war drags on, that moral high ground is eroding quickly.

Trump has already made his hostility toward ESG clear, dismissing it as “woke nonsense” and promising to strip it from corporate decision-making. As Trump returns to power, expect the final nail to be driven into the ESG coffin, giving a green light for multinationals to re-enter Russia without a second thought.

Executives are already laying the groundwork for a return, arguing that ordinary Russians should not be punished for their government’s actions — a convenient justification for reopening lucrative revenue streams.

This playbook isn’t new. When sanctions first hit, pharmaceutical giants like Pfizer, Johnson & Johnson, AstraZeneca and Novartis invoked “humanitarian” reasons to continue manufacturing and selling in Russia, ensuring their operations remained largely untouched. Now, as the prospect of a ceasefire grows, we can expect similar rhetoric from a broader range of industries eager to re-establish their foothold in the Russian market.

The broader geopolitical implications of this are staggering. A corporate return to Russia would send a clear message: autocracy is profitable and the West’s moral outrage is for sale. It would embolden not just Russia but other regimes betting on the West’s short attention span. The ceasefire would go from a chance to build a lasting peace to a green light for transactional politics and profit-driven amnesia.

If we have learned anything from the last few years, it is that Western capitalism thrives on selective ethics. The same companies that rushed to condemn Russia in 2022 are likely drafting strategies to return as soon as is politically viable. Trump’s potential role in all of this — a self-proclaimed dealmaker eager to build a legacy — only adds to the irony.

So do not be surprised if the first beneficiaries of a ceasefire aren’t the Ukrainians but the multinationals, lining up to re-enter a market they never truly abandoned. For them, war is a temporary inconvenience. Peace, however fleeting, is just another business opportunity.

If this stampede happens, it will prove once and for all that the West’s corporate conscience is little more than a facade, crumbling the moment profits beckon.

Before the war, Moscow’s expat community was a vibrant mix of bankers, entrepreneurs, and adventurers drawn to the city’s high salaries and decadent social scene.

That world collapsed after the invasion, with Westerners fleeing en masse as sanctions bit and corporate offices shuttered. But a hardcore few remain — evidenced by the nearly 5,000 members still active in the popular English-language Moscow Pals Telegram group.

If a peace deal materializes, we can expect that number to swell. Moscow has always had a magnetic pull for expats seeking opportunity. If Western businesses rush back in, so will the professionals who follow the money. Whether it be in finance, energy, or hospitality, a reopening Russia would quickly lure back foreign talent proving once again that for many, geopolitics takes a backseat to paychecks.

However, Putin has made it clear: companies that left Russia on bad terms will not be able to waltz back in easily. In 2023, the Kremlin seized control of Danone’s Russian subsidiary and Carlsberg’s breweries in payback for Western moves against Russian firms abroad. This was a warning shot. The Kremlin is keeping score, and firms that made messy, politically charged exits could face serious hurdles if they try to return.

Meanwhile, firms that left cleanly — meaning they preserved jobs and kept operations intact — will have a smoother path back without bureaucratic roadblocks. But there will be a catch: they will not get their hefty exit fees refunded.