Money, is never a culprit in geoeconomics

But the use or pursuit of it might become an issue in crime or social acceptance. When someone parks his money in a bank, his action by itself cannot be questioned or investigated unless there is considerable evidence to prove it as an ill-gotten one. For all sense and purposes money must be treated as neutral asset!

A country’s reserve held in foreign banks, therefore must be strictly treated as neutral one if geoeconomics has to function smoothly. Of late, central banks in the western hemisphere have threatened in a chorus that Russian reserves would be seized or deemed forfeited for the alleged war crimes perpetrated by the Russian state and/or her soldiers.

Normally reserves are held by a sovereign country in its own name elsewhere in foreign lands in order to facilitate international trade in goods and services. Moreover, these reserves are in normal course invested in interest bearing securities issued by the host country entities including treasury department or banks that deal in corporate bond markets.

The over-riding concept is therefore, the reserves are of sovereign nature in that these cannot be frozen or subjected to any and every measure of seizure unless a pathway to such drastic actions is authorised under international law and accepted by both parties owner and holder appearing as litigants in an international court that has jurisdiction over this type of confiscation or seizure.

Any arbitrary decision taken by holding bank, contravenes the basic tenets in law and practice of international banking & finance and would be construed as mere theft. Put it other way, frozen money is in fact stolen money.

In the case of Russia, there are few depositaries who hold her assets. For example EuroClear Bank, the central securities depository based in Belgium, holds frozen Russian assets estimated to be in the region of US$ 207 Billion in Euro, US$ 67 Billion in American Dollar and US$ 37 Billion in British Pound.

Outside the three biggies holdings of US$ 36 billion yen, US$ 19 Billion in Canadian dollars, US$ 6 Billion in Australian dollars and US$ 1.8 Billion in Singapore dollars along with Swiss Franc less than US$ one billion are reported from elsewhere in the globe.

Here are few contentious issues in relation to geoeconomics that need to be addressed on the footing of treating money as a culprit:

1. Could these frozen assets be declared as seized ones and be transferred to another country?

2. Could the income generated by the frozen assets by way of interest & dividends be also declared as such and be used at the discretion of the banks holding these assets? Incidentally, Russian assets in Euro Clear alone has generated an income around US$ 4 Billion last year.

3. How the rest of the world take this type of highway robbery? Would they continue to park money in the West or migrate to another safe haven?

4. Who would benefit from such migration, China or other BRICS nations?

This is indeed Catch- 22 situation in geoeconomics!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist