The level of derangement among far too many of our putative betters has reached such a fever pitch that mere narcissism and grandiosity seem inadequate as explanations. The latest example comes via the Wall Street Journal, in an exclusive account as to how the Trump Administration intends to avail itself of Russian central bank frozen assets, with the fig leaf that of course Russia would go along to curry favor with Trump and because investing in a busted up country is clearly a fabulous commercial opportunity. Let us not forget that the US tried a more adult version of this plan and got nowhere. It hired BlackRock as an adviser to flog a Ukraine reconstruction fund,1 back the days when the tale that Ukraine would win the war seems much more plausible, and got nowhere.
The interesting angle here is that the US has pitched this goofy idea to EU officials, since they control the bulk of the frozen Russian central bank assets which has been reported most recently as €140 billion or more worth in Euroclear.2
Mind you, the Europeans, in the persons of European Commission chief Ursula von der Leyen, and her allies in planned Russian asset heist like Emmanuel Macron, Kier Starmer, Frederich Merz, and Kaja Kallas, are as deluded, but less flamboyantly so, since they are having to labor mightily to paint a veneer of legality over a theft that puts the budgets of EU member states in peril. Part of von der Leyen’s scheme is grandly to apportion liability to each and every member state that is made to participate in this heist, even if it is fiercely opposed.
But back to the more obviously bonkers Trump plan. The Journal account suggests that the Trump plan to use Russia frozen assets in a US managed “fund” for Ukraine reconstruction, which was part of leaked 28 points plan, has set off the frenzy in European capitals to grab them pronto, before the US and Russia can come to an agreement….as if that were at all likely. From U.S. Blueprint to Rewire Economies of Russia, Ukraine Sets Off Clash With Europe:
The Trump administration in recent weeks has handed its European counterparts a series of documents, each a single page, laying out its vision for the reconstruction of Ukraine and the return of Russia to the global economy…
The U.S. blueprint has been spelled out in appendices to current peace proposals that aren’t public but were described to The Wall Street Journal by U.S. and European officials. The documents detail plans for U.S. financial firms and other businesses to tap roughly $200 billion of frozen Russian assets for projects in Ukraine—including a massive new data center to be powered by a nuclear plant currently occupied by Russian troops.
Let’s stop here. The Zaporzhizhia nuclear power plant is not merely “currently occupied”. It is in one of the four oblasts that voted to join Russia and Russia, per its constitution, has made part of Russia. There is simply no way that the West is going to get use of it on anything other than arms-length commercial terms.
Any discussion of power or reconstruction of Ukraine generally ignore the fact that no one other than Russia can execute it. Recall that Russia has already done considerable damage to not just Ukraine electricity transmission but increasing to generation as well. Ukraine’s grid runs on old Soviet standards, as does Russia now. Western businesses simply are not going to set up production capacity to make want amounts to a very large special order of the needed repair and replacement kit. Russian firms are in that business and could be persuaded or induced to gear up for the needed big but time-limited output surge.
And of course there is the overriding highly optimistic assumption, that there will be an economically and politically independent Ukraine after the war. Ukraine and the EU are laboring mightily to make sure that does not happen. Their continued intransigence and belligerence have made the case to a highly risk-averse Putin that Russia will have to dictate outcomes on the battlefield. So the only question is how much Russia decides it has to add to Russia versus make into a rump Ukraine overseen by a friendly regime.
Back to the Journal:
Another appendix offers America’s broad-strokes vision for bringing Russia’s economy in from the cold, with U.S. companies investing in strategic sectors from rare-earth extraction to drilling for oil in the Arctic, and helping to restore Russian energy flows to Western Europe and the rest of the world.
This is the worst sort of arrogant paternalism, as if Russia still needed the West.
The quiet scandal in global economics:
From 2008 to 2025, Russia’s real GDP per capita grew faster than Germany, the UK, and France despite sanctions, SWIFT bans, export controls, frozen assets and a full-scale geopolitical confrontation. pic.twitter.com/0C7ijjrCcc
— . (@Lucid_Watcher) December 5, 2025
But not to worry, the Journal reassures us that Russia really is hurting:
A new assessment by a Western intelligence agency, reviewed by the Journal, said that Russia has technically been in recession for six months and that the challenges of running its war economy while trying to control prices are presenting a systemic risk to its banking sector.
One has to assume the Russian negotiators were also informed about this scheme (a version of this idea, but perhaps less detailed, was to be respectfully receptive when the US presented this asset, erm, usage plan, as opposed to bursting out laughing, or alternatively getting angry over being presumed to be total chumps.
Returning to the Journal:
Some European officials who have seen the documents said they weren’t sure whether to take some of the U.S. proposals seriously. One official compared them to President Trump’s vision of building a Riviera-style development in Gaza. Another, referring to the proposed U.S.-Russia energy deals, said it was an economic version of the 1945 conference where World War II victors divvied up Europe. “It’s like Yalta,” he said.
Readers are encouraged to opine, but given the early similarly high-handed-while-also-barmy Ukraine “raw earths” scheme that the US browbeat Ukraine into accepting after some negotiation, yours truly thinks this is part of Team Trump following the Red Queen practice of working to believe impossible things. Such as:
U.S. officials involved in the negotiations say Europe’s approach would quickly deplete the frozen funds. Washington, on the other hand, would tap Wall Street executives and private-equity billionaires to invest the money and expand the amount available to invest. One official involved in the talks said the pot could grow to $800 billion under American management. “Our sensibility is that we really understand financial growth,” the official said.
Now to the European part. Ursula von der Leyen is attempting to ram through legislation that would allow the Commission to seize the frozen assets in Euroclear pursuant to emergency powers. Belgium has objected vociferously since it would be on the hook if Euroclear were sued successfully. The ECB has refused to provide a backstop:
I asked ECB President Lagarde about the potential impact on financial stability of using Russian frozen assets held at Euroclear (140 billion). The ECB has (rightly) indicated that a guarantee would be a breach of the Treaty. Other options urgently needed for Ukraine👇 @wbeke pic.twitter.com/ih9j89n5GV
— Dirk Gotink (@DirkGotink) December 3, 2025
Since Euroclear has also said in no uncertain terms that it thinks the asset heist, prettied up as trying to use the assets as collateral for loans, is illegal, I am not sure how it can be compelled to turn over the funds, given the general rule of “possession is 9/10 of the law” and the near-certainty that Euroclear and Belgium would seek an injunction too.
❗️Belgian Prime Minister Bart De Wever called the European Commission's proposal to use frozen Russian assets to provide Ukraine with a reparations loan “theft,” reports VRT NWS.
“There are certainly better solutions than stealing the Russian central bank’s money. This is a… pic.twitter.com/KJR0mQWD5D
— 🪖MilitaryNewsUA🇺🇦 (@front_ukrainian) December 10, 2025
Aside from Russia suing Euroclear in a non-EU court where Euroclear operates (readers can opine, but I see Singapore courts provide for discovery), Russia can also take matters into its own hands:
One of the unintended consequences of the EU's batshit crazy plan of ̶s̶t̶e̶a̶l̶i̶n̶g̶ appropriating and repurposing Russia's frozen assets is the fact that Euroclear, a body responsible for processing equities, bonds, derivatives, and investment fund transfers, still holds… pic.twitter.com/6RHLDTpjEk
— Nina 🐙 Byzantina (@NinaByzantina) December 10, 2025
But weirdly (or perhaps following its friends at the Commission) the Financial Times in a story yesterday tried to make Hungary’s Viktor Orban, regularly demonized for being too friendly with Russia, into the bad guy. From a Wednesday story:
EU countries are to fast-track a decision to indefinitely immobilise up to €210bn in Russian sovereign assets, in an attempt to bypass Hungarian Prime Minister Viktor Orbán even before Europe’s leaders meet for a summit next week.
The hurried effort to pass the legislation — which invokes emergency powers to override national vetoes on the extension of sanctions — aims to protect Brussels’ leverage in US-led peace talks over the war in Ukraine, according to officials familiar with the plans.
Diplomats handling the legislation see advantage in moving swiftly in coming days to detach the contentious question of immobilising assets from the debate on raising loans for Kyiv backed by the frozen Russian funds. That funding question will be left to EU leaders next week.
The move to vote within the coming week, overriding the principle of unanimity on sanctions decisions, risks enraging Hungary and other countries that oppose the measure. Past instances of EU countries outvoting other member states on critical issues — such as Poland and Hungary on migration policy — have caused bad blood between capitals for years.
The European Commission last week proposed using €210bn of Russia’s foreign assets immobilised under sanctions in the EU to fund a loan to Kyiv, initially for €90bn that would be disbursed in the next two years.
For the loan scheme to work, the underlying assets need to be immobilised indefinitely, rather than for six-month periods that can only be renewed with unanimous agreement of all EU27 countries…
To bypass the risk of the sanctions being lifted, the commission has proposed using emergency powers reserved for dealing with economic crises to indefinitely impose the sanctions on the assets. Enacted under Article 122 of the EU’s treaties, it can be passed with just a majority of EU countries, circumventing potential vetoes.
Mind you, there is no crisis. There will be a tsunami of litigation if the Commission and its allies manage to get this scheme implemented. And there would be a crisis due to their malfeasance if the plaintiffs were to prevail. So the plan is use emergency powers to contend with the emergency knowingly produced by entirely voluntary action decried by those best in the know (Euroclear) as illegal. Alexander Mercouris covered the circularity of this argument in his video on Wednesday, and earlier argued that the loud and clear objections by Euroclear and the Belgian government would be powerful ammo in litigation over any seizure attempt.
As an aside, one has to think that a and perhaps the reason that Ursula von der Leyen has pursued this scheme so manically is that it is far and away her best opportunity to greatly expand the Commission’s powers. She’s been on a massive land grab ever since she took office.
This morning’s Politico European newsletter seemed less bullish than the prior day pink paper account, and also corrected the barmy idea that Orban was the big baddie:
GROUNDHOG DAY
ENVOYS DISCUSS ASSETS SUPERFREEZE: EU ambassadors will today weigh up whether to hand the Commission emergency powers to keep Russia’s state assets frozen indefinitely. Envoys will examine updated legal texts after Wednesday’s inconclusive discussion, three EU diplomats told POLITICO’s Gregorio Sorgi.What’s that: The mechanism is a cornerstone of the Commission’s plan to mobilize €210 billion in frozen Russian assets for Ukraine — most of which are held by the Belgian-based Euroclear. It would overhaul the current system that compels EU countries to unanimously reauthorize the sanctions every six months.
That means Kremlin-friendly countries such as Hungary and Slovakia would lose the power to release the sanctioned money with a simple no vote, leaving EU capitals on the hook to repay the loan to Russia.
The light at the end of the tunnel: The diplomats said late Wednesday that the proposal could be “stripped down” in a bid to win Belgium’s support and adopt the plan by the end of the week. Hopefully.
Yes, it’s still all about Belgium: PM Bart De Wever is holding out over concerns that Belgium could be financially exposed if the money needs to be repaid and has now asked for more safety nets. In an interview with VRT NWS Wednesday, De Wever even refused to rule out legal action if the EU moves ahead with seizing the assets…
More stick than carrot: Europe’s strategy to sway Belgium may be to warn the kingdom that it could be treated like Hungary if it doesn’t come on board — with its diplomats, ministers and officials losing their voice around the EU table, reports Zoya Sheftalovich.
The Politico entry contains this amusing section:
.
“No jurisdiction”: A legal memo circulated among diplomats Wednesday by law firm Covington & Burling rejects Belgium’s argument that it would face major legal retaliation from Russia.
The four-page document says the risk of litigation is “minimal,” insisting Russia wouldn’t be able to challenge an EU reparations loan in the International Criminal Court or “any comparable international adjudicative body.”
Legally-sophisticated readers know that if you look long enough, you can find a lawyer who will bless pretty much anything.3 And I don’t think of Covington as premier firm in financial or international litigation. I would have thought one of the top New York “white shoe” or London firms would be the go-tos on this topic. A ranking by Chambers of US firms alone for Disputes (International & Cross-Border) | Global of US firms confirms this notion, putting Covington well down on the list. I hope our expert commentariat will pipe up with their views.
Even though von der Leyen and her fellow conspirators are laboring mightily to get her long-sought “seize not freeze” scheme across the line, note the Politico signposting: Groundhog Day. They are of the view this will be another episode of motion playing at progress.
But even then, simply keeping the matter in play bolsters Zelensky domestically, as in continuing to keep alive the fantasy that there will be more money and weapons for Ukraine. European leaders are as committed as every to fighting to the last Ukrainian.
_____
1 BlackRock never committed to invest in this scheme, contrary to some claims.
2 The total amount reported has varied, in part because the EU has been stealing the interest, and some accounts may include the assets of sanctioned Russian entities and individuals along with the central bank holdings. The Financial Times on Wednesday reported that Euroclear held €185 billion of Russian frozen assets.
3 For instance, recall Linklaters blessing Lehman’s use of Repo 105 to engage in accounting fraud, which pretty much every legally responsible adult derided when it became public.
Just a little quibble: “Ukraine’s grid runs on old Soviet standards, as does Russia now. Western businesses simply are not going to set up production capacity to make want amounts to a very large special order of the needed repair and replacement kit. Russian firms are in that business and could be persuaded or induced to gear up for the needed big but time-limited output surge.”
Crazy but true: I happen to know for a fact that ABB (a company headquartered in Switzerland but production mostly in the EU) delivers huge amounts of electrical equipment to Russia. Supposedly the delivery is to Hungary or Switzerland. As an insider joke workers in Germany put a “Z” on deliveries to Russia. Mind you: industrial workers in Germany vote 50% for AFD. With a little modification anything produced for the European grid will also work in Russia.
What do you mean by “electrical equipment”? That covers a multitude of sins.
I have been told the reverse as far as the transformers are concerned. Ukraine was having to scavenge former
Warsaw Pact states for replacements early in the electricity war. They would presumably not have needed to do so if they could be manufactured readily by friendlies. Apparently most utilities do have a lot of spares, they are pretty long-lived, so it may be only with the increased intensification of the grid attacks that Ukraine is now short on/out of gear.
There are no transformers on the market. Not for Ukraine and not for anybody. Delivery times are in years. The reason being the expansion of the grid caused by renewables. ABB is delivering all kinds of electrical fuses. Which shows the Russian market is humming. Lot’s of building as a few hundred thousand soldiers from formerly depressed areas are getting huge payments for serving in Ukraine.
When you look at Russia war you should look at Russia casualty rate. That will say how long Russia can continue this war until Russia people start feel pain. We also have to count how long can people afford 16% interested rate. I still don’t get how that central bank can still keep her job. Russia have lost about 100k soldiers and same amount of injured. All this spell Russia will accept USA peace deal but the only stopping it is Ukraine. Putin was wrong in his calculation that he would get a good deal from USA by dragging this war slowly
Russia regards this war as existential. So your metrics do not apply. Look as WWII for how much pain Russia can take, This conflict is not in the same universe.
I doubt that Russia could take as much pain as in WWII. Already 20 years ago every conscript was given a SIM card so he could phone home to mom once a week. Inconceivable in Stalin times. But Russia doesn´t have to take such pain. The “kontraktniki” are paid handsomely. There are no conscripts at the front.
Another story is that it is the ethnic minorities and the poor (which mostly overlap) that are doing the dying. Not your single son of a middle class family in Moscow or St. Petersburg. Russia is closer to us than we think.
This is based on purposeful reading of the statistics, by comparing the percentage of kontraktniki of the eligible population of the region. In the reality, Moscow and St. Petersburg regions provide the bulk of the contract soldiers – as in several hundred thousand, just because they are so huge population centers. Especially after the liberation of the Kursk oblast the St. Petersburg region has constantly exceeded it’s recruitment quota.
Also, at least a year or two ago, several Duma members, governors, mayors and other members of regional administration volunteered for the SMO. Mostly those with military experience, but anyway.
You’re right this war is existential for Russia, and I think a lot of Russian people have come to that conclusion, including the young soldiers fighting on the front lines. But is the war being fought as if it were existential for Russia? In my view, no.
Two strategies come to mind one where Putin forces the Russian population to accept a Minsk style peace deal, or another where Putin believes the West will eventually come to the negotiating table to agree on a new security arrangement. A new security deal won’t happen but Russia might be able to secure a Minsk 3 agreement with the USA However, the EU and the UK would never allow that to happen.
This war will likely drag on until the Democrats return to power in the USA There’s no way the Republicans will hold onto the House or the Senate. So now you have an EU implementing austerity on steroids just so it can keep sending billions to Ukraine, and the USA doing the same.
Scott Ritter said just a few days ago that Ukraine will collapse soon and its people will freeze but none of that really matters, because for Russia to capitalize on such a collapse, it would need the troops to actually take Ukraine. And right now, Russia doesn’t have those troops. Nor will the Ukrainian population rise up in support. Instead, everyone will either wait their turn to be sent to the front or try to escape the country.
I just think people are struggling to accept what’s coming because it’s so unprecedented. I hope you’re right but sadly, I fear we’re heading toward a very dark place in this world. I may be wrong, but I think this is the consequence of the lesser evil strategy finally coming home to roost. These politicians in the west they have no morals.
So US sued for peace after Antietam, I guess?
All this spell …
… differently in Cyrillic. They even have a word meaning non-agreement-capable*.
* See for example https://www.moonofalabama.org/2022/06/how-russia-can-and-will-de-nato-size-europe.html
The retaliatory response of Russia confiscating European assets would be an adequate deterrent to the theft of Russian funds if the EU leaders were sane, but that is a big if.
If I were Belgium (things you never thought you’d write!), I would seize the Russian assets *and* European Commission assets to the same value as collateral for the indemnity *and* the Euroclear and SWIFT servers and IT personnel for long enough to place them under Belgian control. When the rules are broken, the rules are broken and all that counts is leverage.
Remember poor Greece and its attempt to leave the Euro Hotel California? No leverage. But controlling Euroclear would give Belgium the next best leverage to controlling Target 2….
Since an ongoing fantasy about Russia is to crash Putin’s credibility in his home country, via tempting Putin to go along with US/European schemes, Trump’s home peanut gallery wants to pretend that Ukraine is close to victory… a song that is sung by the media (and arms merchants) that have played along for so long. After all, having pushed Ukraine into suicidal choices, don’t “we” the West owe Ukraine and ourselves some dignity amidst the rubble?
Well, The Financial Times is not alone on demonizing Orban (no matter if he is good or bad I am not opining on this) put he is the preferred excuse for many to stay silent when in reality they do not align with the General Stupidity now in charge. Today I found an article written by a retired Spanish councelor for the EU titled “Europe and The Accounting Miracle of The Century: The “Reparation Loan” and Other Legal Fictions” (in Spanish) which explains the (false) equilibriums that the EU pursues to seize the Russian assets while at the same time claiming they are not touching them and at the same time assuming fiscal obligations for EU countries which are out of EU’s reach and treaties. This is all incredible stupid and there are many more governments (more than Just Orban’s) which are absolutely not wanting to become indebted for this unlimited support to Zelenski. I would mention the Spanish government even if they do not say it when being forced to reduce debt and at the same time being wanted to increase debt… because Zelenski. If somehow the EU Commission manages to force their financial games I anticipate this as the beginning of the end of the EU. I guess we will know by the 18th of December.
The timing coming so soon after the Belgians took fright at the seizure means this is probably an effort to cajole them with a US blessing. Now the real question is: Is the EU/UK trying to bribe Trump to support the asset seizure, or in reality was the asset seizure a US lead directive all along?
Sorry, this is an incorrect reading.
1. The US wants Russia to contribute Russian assets, not steal them, so there would be no risk to Brussels if Russia goes along.
2. The EU is opposed to this scheme. This is off point utterly to what the EU intends. It wants the money to be used to continue the war.
Does anyone have figures for the Russian assets owned by US, European and other investors at the time of Russia’s invasion of Ukraine? Many of which are now likewise frozen, and written down, but have great underlying value if not endangered by the proposed theft? The lack of discussion ofwhat is at stake for western investors (including pensioners & other indirect holders) seems extraordinary.
I hate sounding harsh, but you are awfully late to that party. And you seem to be suggesting that was Russia that could or did take hostile action, when Russia bent over backwards in the early years of the SMO not to abrogate agreements with the West. For instance, Russia kept supplying the EU with gas until the EU made it a point of pride to go without.
It was the US, EU and UK investors that imposed shock and awe sanctions in February 2022. Western owners of Russian securities and ETFs at the time were very shortly barred from trading. Their balances were written down to zero at US brokerage firms. Now there has been wrangling about recovery. For instance, the BlackRock Russia ETF is trying to complete its liquidation by year end. It last traded at $8.06 but I cannot tell quickly how much investors recovered: https://www.blackrock.com/us/individual/products/239677/ishares-msci-russia-capped-etf#/
As a holder of Gazprom, Sberbank and Polyus, not only frozen and effectively zero, but getting none of the dividends as well. There was a point I believe, where sale at a huge discount was possible to a too big to fail bank that was allowed to keep access to the Moscow exchange.
What Covington does a heck of lot of in Brussels is lobbying, esp. on behalf of tech giants. To my eyes, that’s what’s behind the stupid memo. Mutual hand-washing.
Aha! Thanks!
…Kaja Kallas, are as deluded, but less flamboyantly so, since they are having to labor mightily to paint a veneer of legality over a theft that puts the budgets of EU member states in jeopardy. Part of von der Leyen’s scheme is grandly to apportion liability to each and every member state that is made to participate in this heist, even if it is fiercely opposed. And Italy’s share of the estimated 185 billion euro at Euroclear would come to some 25 billion euro.
YS:
I add a couple-a edits, with your indulgence. First, I’ll add the polite word “jeopardy” instead of “pasticciaccio,” that is, omnishambles. Second, I’m reading here in Italy the figure of 185 billions euros parked at Euroclear, too, which may come from Financial Times (or another source).
What is this current bout of tripping over one’s wee-wee to wreck things stemming from?
As Yves Smith has consistently pointed out, as well as the other writers at Naked Capitalism, what we are now witnessing is elites running helter-skelter to try to cover up their complicity and criminality in the proxy war in Ukraine (one million dead Ukrainians, mainly men sent to the slaughter) and the genocide in Palestine (minimum acceptable estimate, in my not so humble opinion, is 400 000 slaughtered in the West Bank and Gaza). Here in Italy, the formidable philosopher Donatella di Cesare and ex-ambassador Elena Basile have been elaborating the same line of thinking.
So we have a case of convergent evolution (take that, anti-Darwinists): Trump and von der Leyen are acting pretty much alike. The law is for the little people. Their carefully defined constitutional roles don’t matter anymore — what matters is our chance to witness their lust for power.
Hmmm. I wonder if Dr. Guillotine’s marvelous invention can be trundled out for a double salami slicing.
Or am I overestimating the severity of the symptom? (To which I will add in my argument for failed elites avoiding consequences Hillary Clinton’s recent spewings, Marco Rubio and resentments, the timeless Kaja Kallas, Pete Hegseth, Mark Rutte, and the thoroughly egregious Friedrich Merz.)
PS: I am no fan of Vladimir Putin, but the line chart of GDP growth explains much. Not to be overlooked.
Is Covington & Burling a premier firm in international litigation? And does their listing as a Band Four national firm on the Chambers list support that they are not?
I don’t know who at Covington wrote the memo referenced above and I haven’t read the memo. That being said I worked at Covington as a litigator and at one of the higher ranked firms listed on the Chambers ranking for international litigation. I’ve also advised law firms about how to be recognized by Chambers, both as law firms and as individual attorneys (which Chambers also ranks).
My overwhelming experience is that any firm mentioned by Chambers and many law firms not recognized by Chambers do very careful work, especially when litigation departments send memos about the law to clients. Covington has been around since 1919. If their lawyers write a memo that they think the risk of litigation is low because of lack of jurisdiction, there is a very high probability that there is at least a colorable argument supporting that conclusion. That doesn’t mean the conclusion in the memo will prove correct, but it is unlikely to be just made up to tell a client what it wants to hear.
And there is no difference between a Band One firm and a Band Four firm in Chambers in this regard. Chambers has its quirks, but it’s people interview law firm clients as the basis of creating their rankings. If you are a band four firm nationally in a given practice area, that means you are in the top 10 to 15 firms in the whole country. That is a signal to in-house lawyers at large corporate law departments that you are very good in that practice area.
Again I don’t know specifics about this particular memo, but it’s a stretch to conclude that a law firm just manufactured a legal opinion desired by a client because of its Chambers ranking.
Band 4 out of 5 is low, not high, relative to the other big firms. It means they are in the running as a reasonable choice and might be good on a horses-for-course basis All the firms in the higher bands are above them. And the ranking was for what amounted to their international practice compared to other big US firms, not international litigation and not international financial service. As indicated there are very strong UK firms in international legal works, such as Freshfields in arbitration
And I have been a Covington client, as in I retained them when I was head of M&A at Sumitomo. They are not all that strong in litigation. There are specialist firms (and not small ones, BTW) that are the killers in that field.
You asked for the commentariat to provide perspective on your comment about Covington’s litigation prowess. So, I did. I understand that, based on your experience as a client of the firm, you weren’t that impressed. Suffice it so say that some folks have reached a different conclusion. Their litigation department has been recognized many times as an elite department. See, e.g.: https://www.cov.com/en/about/firm-honors
None of this speaks directly to the specific memo that was referenced in the post above.
I asked for reader experience. You did not indicate you had any as a client and instead tried to argue from the same link I provided. You did not even bother finding other sources that could perhaps be more germane. You are not in a position to judge Covington on any sort of comparative performance basis as an ex-employee.
Chambers is limited, as I indicated, by covering only US law firms. My gut is London being a much more international finance center (and also having until recently been in the Union) would be more likely to have the best counsel for this sort of matter.
I did not say I was not impressed. I was a client of Gene Ludwig, who I imagine you have heard of. I went to Covington rather than a NYC firm because I knew a Japanese bank would be way down the food chain for a white shoe NYC firm while Covington would (and did) value having Sumitomo as a client more than they would have. So I got a good seasoned M&A partner while with a NYC firm, I would be at risk of being fobbed largely off on a 5 year associate. I knew generally that what I needed ought to be within their capabilities. And they did a fine job on my particular matter.
Being good in one area (negotiating a fairly simple but cross border M&A deal) does not extend to other areas. They ran up a huge and unwarranted bill on some international tax structuring, basically reinventing the wheel.
The awards list you linked to prove my point, not yours. The awards were nearly all onesies, from years back and very narrow sub-fields of litigation.
I have also had the privilege of sometimes working with top M&A and securities lawyers (the top M&A counsel at Cleary and Cravath, Rodgin Cohen at S&C before he became managing partner, for instance) and so know what a very top tier counsel looks like. And so I have also been lucky enough to occasionally find less illustrious representation that was excellent, such as a biomedical engineer who first worked at the NIH and drafted the first US intellectual property agreement. 80% of her language is still in use. Later general counsel at a public company, so both 3/4 of the way to being a securities lawyer as well as an IP lawyer. Drafting a bit rough but effective, and a fantastic negotiator.
No you did not ask for reader experience with Covington, you asked “I hope our expert commentariat will pipe up with their views.”
Well EnigmaWrappedInBacon piped up with their views. You may not agree with them but they did specifically what you asked and you jumped down their throat.
Not to doubt your comment or Covington’s expertise, but Covington has represented Ukraine and Ukrainian companies in disputes with Russia. I assume they wrote the memo for Ukraine that wants reparations, not for Everclear or European companies or banks that might be on the hook if Covington’s opinion is wrong.
No, please re-read the Politico quote. It was very clearly about the Euroclear fracas, see the reference to the ICC, which would never come up in a commercial dispute. In keeping, it also referenced the Russian state retaliating, not corporate entities.
But that is another useful tidbit on Covington.
Putting aside the fact that this whole scheme doesn’t make much sense, I could see a reason for Russia to go along with it (or at least not oppose it publicly).
They’ve already likely written off those assets and if this works out to be a “free” card to play to deal with Trump, why not.
It would also create even more conflict between the US and the EU because they both want the assets for their own goals.
Alexander Mercouris has said the reverse, that informed contacts have told him it would suit Russia for the West to seize the assets because they could very legitimately make a monster stink, which would create more sympathy in the Global South. Recall that one big reason Russia has had to go slowly in the war is not just its practice of attrition (that is the big driver) but also that its economic allies are not happy with Russia gobbling up Ukraine, no matter how legitimate the reasons, and would prefer a negotiated settlement. The seizure would be further grist for the case that the West is untrustworthy, does not respect agreements, and there is therefore no sound basis for trying to reach a settlement with them.
Tweets in May (with links to sites in Asia) said Russia was contemplating suing Euroclear in Hong Kong.
See also:
The Western countries have been doing a bang-up job making this case themselves throughout their entire histories! Everyone from native Americans in the 1600s forward can help testify to this case if it’s needed.
Ultimately, I don’t know because I don’t know what Russian officials are thinking.
It’s just that using those assets to damage relations between the EU and the US could be a viable option.
We’ve seen public statements threatening legal action (or worse) over EU confiscation, but nothing (yet?) about the US “proposal”.
Maybe they just don’t take it seriously or maybe it suits Russia just fine to have the US and EU fighting over that money.
Personally I have lost track of the number of loans that have been taken out using the interest of those frozen Russian assets as collateral. It was like every month a new loan like this was being made. So of course the Europeans will not allow those assets to be swiped by the Americans – nor will the Russians. About half would be used in repairing the damage in the Ukraine and a red line for Russia is “reparations.” The Russians will have to spend huge amounts of money to rebuild the Donbass alone. And if Donny thinks that the Russians will hand over one of their major power plants, well, America is more likely to hand over one of theirs to the Russians. I think that Jared Kushner had a big role to play in that so called peace plan as it tries to make sure that America in the end wins this conflict while making huge pots of money. for Trump and his team, it is always about making money and nothing else exists.
Politico yesterday had the following explication:
So if Politico’s read of it is right, there is no “loan” backed by the interest on Russian assets. Rather, the interest is taken directly (legal mavens may chime in on whether this constitutes theft) to pay for some other extant obligation. To G7, so the Americans are getting some of that money too…
That whole last paragraph is utterly fascinating. Starting with the fact that Euroclear is already building up a contingency reserve for “legal risks”, which is kind of telling in and of itself.
Parenthetically. I know everyone’s been focused on the possibility of a lawsuit against Euroclear. I seem to recall the Russian government, possibly in the form of Lavrov, dropping an off-hand comment recently that European private companies still have several hundred billion euros worth of assets inside Russia. Meaning, a reciprocal action could be the seizure of these assets (I assume a majority of these are equity stakes in joint ventures or Russian subsidiaries). Yet it seems the European business community is utterly silent on the question, at least in public. Do they simply not want to admit that these assets still exist? Do they hope and pray that the Russians would exercise leniency and go after Belgium and Euroclear instead (which they very well might)? Is this simply yet another completely, utterly unexpected and thoroughly surprising move that no-one ever expects the Russians to make? Who knows…
“Yet it seems the European business community is utterly silent on the question, at least in public.”
This is a continuation of an attitude that the European business community adopted almost a decade ago.
It was silent on the question of Brexit — despite all the evidence that the way the British government was mishandling matters would have devastating consequences (practical, commercial, financial).
It was silent when the EU forced the renunciation of Russian energy imports (oil, gas, coal), and silent when Nord Stream pipelines were sabotaged — despite knowing very well the devastating consequences all this would entail regarding energy prices and the availability of raw materials for industrial processes.
There was the supine way the EU reacted to the tariffs imposed by Trump, and no big outcry from the business community — if there was one, I do not remember it to be followed by concerted actions to put pressure on the EU Commission and on the European governments.
Now it is again silent while the EU considers measures that will entail not only dire losses regarding investments in Russia, but also the ruin of Europe as an international financial centre (plus a possible collapse of the €).
My opinion has always been that large, internationally active firms do not care — they will just relocate their activities somewhere else if conditions become unbearable; they do not have any loyalty to Europe anyway — while SMEs lack influence — they are too small to lobby successfully when governments only take big players seriously.
But this is now going a bit far. No matter what foolishly destructive measures the politicos envision, industrial, commercial, and financial circles never put their foot down; it is getting very disconcerting.
What I’m wondering is that in 2022 it was reported that most of those Russian assets were debt securities (likely Eurobonds), so basically IOUs by EU, not actual money. How much has this changed in a few years, I can’t seem to find out.
Anyway, to me it seems that Eurozone countries not honoring their debts would cause even more economic havoc than just breaking the Euroclear and the kingdom of Belgium or the Russian countermeasures.
High quality bonds are financial assets and easily monetized. I don’t understand your point.
In general, large balances are put into securities. A bank deposit is a liability of the bank and is also not money. It’s guaranteed only up to very low limits.
Depositaries like Euroclear and the US DTC (Depositary Trust Company) are full of securities, not cash balances.
My point is that if we’re talking about debt owed to Russia by, say, EU Commission and some Eurozone countries, and they now go and decide they will just resell this debt and take the money, it’s not just theft of Russian assets, but also defaulting on the “original” debt.
I really, really don’t know how this works (thus the word “wondering” in the original post), but if this is as I understood, would there really be market for bonds under such a serious legal predicament? And given the risk, I’d assume they’d have to be (re)sold with a significant undervaluation.
No, Eurobonds are not “debt owed to Russia”. They are bonds that Russia bought. The EU Commission does not issue bonds. Nor does Europe. Eurobonds are issued both by companies, banks, and states. They are legal obligations to pay interest and principal irrespective of who owns them at the time. That is why seizing them from Euroclear = stealing.
EU Commission indeed issues bonds.
The estimated value of the outstanding bonds is €1 trillion for the Commission alone. Another trillion of outstanding bonds has been issued by other EU institutions, according to CEPR.
I expect that RU has long ago written off those frozen central bank assets (which is not to say that RU won’t litigate ferociously to get them back…..even if RU loses in court, the bad publicity surrounding the litigation might cause irreparable damage to the EU).
Seizing and spending the stolen assets (assuming weapons and the trained UKR manpower to use them are readily available, which I very much doubt) will only serve to prolong the conflict for a few more months.
The real issue here is the potential long-term consequence to the EU if Ursula succeeds in grabbing (and spending) RU’s money. I think the reputational damage will be enormous. Of course Ursula (et al) will be long gone by the time the legal chickens come home to roost (the wheels of justice grind slowly), so she likely doesn’t care.
This does not bode well, methinks.
No, see the comment above re what Mercouris’ sources say. Russia has every incentive to litigate for geopolitical reasons. Look at how (in a very different sort of case) the US tried to prosecute Internet Research Agency, the bot farm part or totally owed by Prigozhin, that famously won the 2016 election for Trump with $200,000 of Facebook ads…half of which appeared after election day and 25% of which were viewed by no one.
The DoJ filed criminal charges v. the IRA to advance its Russiagate narrative (I forget whether v. individuals or the company).
They showed up to defend the case. The DoJ immediately dropped it.
So as the Covington memo suggests, methinks the Eurocrats are similarly over-relying on the idea that the Russian government or individuals won’t act.
Oh, of course RU will litigate; perhaps I wasn’t clear enough. My point was that they will do so not in any expectation of getting their assets back, but simply for the fun of it (knowing that the awful publicity will torch the EU’s reputation and cause dissension both inside the EU, and between the EU and the USA).
Shredding western unity (and possibly shattering the EU itself) is arguably worth more to RU than 200bn clams (or whatever the exact amount is), and in any case RU will offset much of this 200bn loss by seizing EU assets inside RU.
has anyone in he west calculated the value of western assets in Russia that could be seized in retaliation for this bizarre scheme? it can’t be a small number.
“The documents detail plans for U.S. financial firms and other businesses to tap roughly $200 billion of frozen Russian assets for projects in Ukraine—including a massive new data center to be powered by a nuclear plant currently occupied by Russian troops.”
As if, after all of this, the first thing on the minds of the people remaining in Ukraine is some damn data center.
Putin signed a decree in 2024 that allows Russians to claim US assets in Russia, if Russian assets were seized by any member of the G7. Some online estimates (no link) have been as high as
$1 Trillion.
Aha, good intel! But not European?
I believe the decree in question obligated the government to prepare legislation to allow Russian subjects who’s property or assets have been confiscated by a G7 country to go to a Russian court to receive compensation from similar property or assets of the said country’s subjects holding within Russian jurisdiction.
Sort of a counter to the REPO act, but covering all G7 countries and over $80 worth invested in Russia by them.
And right on cue, the Central Bank of Russia today announced it is suing Euroclear in the Moscow Court of Arbitration for recovery of losses caused by action of Euroclear.
Bloomberg story on the suit:
https://archive.ph/sHVUr