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LOCKED OUT

The G-7 has frozen all of Russia’s reserve assets in their countries

People gather during an anti-war protest, after Russia launched a massive military operation against Ukraine, next to the Grossmuenster church in Zurich, Switzerland
Reuters/Arnd Wiegmann
United front.
  • Nate DiCamillo
By Nate DiCamillo

Economics reporter based in New York.

Published Last updated

Russia is running out of options to participate in the global financial system as it faces bank runs and a ruble crash. Over the weekend, all G-7 countries moved to freeze Russia’s foreign currency reserve assets.

That’s on top of sanctions imposed by the US and the European Union against Russia’s biggest banks as well as president Vladimir Putin and other Russian officials. On Feb. 28th, Switzerland joined the effort, with president Ignazio Cassis saying “we are in an extraordinary situation where extraordinary measures could be decided.”

Ahead of its invasion of Ukraine, Russia had stockpiled $500 billion of foreign currency reserve assets to protect itself from potential penalties from the West. But now, most of that has been frozen. Out of the top countries where those assets are stowed, China is the only one not to have announced any sanctions.

The impact of Swiss sanctions

Russians have $11 billion in deposits in Switzerland, according to the Swiss national bank data. That doesn’t include portfolios of securities, bonds managed by Swiss banks on behalf of Russians, or offshore wealth such as shares in private businesses and in real estate, said Gabriel Zucman, an economist at University of California, Berkeley. “The true number could easily be 5 to 10 times larger,” he said.

Switzerland has taken similar steps before. In 2021, it imposed sanctions against individuals from Myanmar and Belarus, and it implemented a series of measures in 2014 to make it harder for Russian banks to work around the EU sanctions via Switzerland, said Josh Lipsky, director of the GeoEconomics Center at the Atlantic Council. But none of these sanctions were done in full coordination with the EU.

“Bringing in Switzerland could magnify the effect of sanctions,” said Edoardo Saravalle, a sanctions researcher.  “Switzerland is a key commodity trading venue and home to Russian expatriates so the alignment could reach into other areas as well.”

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