Research & Insights #36

US public support for arming Ukraine declines

Americans from both major political parties are increasingly less supportive of the idea of supplying arms to Ukraine. According to a Reuters/Ipsos poll, only 41% agree with the statement that Washington “should provide arms to Ukraine”, compared with 35% who disagree and the rest who are unsure. Since the invasion by Russia in February 2022, Washington has spent US$44 billion to supply Kyiv with dozens of tanks, thousands of rockets and millions of rounds of ammunition. Western media and pundits are changing their narrative about the war in Ukraine, and President Zelensky has admitted that “fatigue” is setting in more broadly in the war effort. Moreover, in the context of the latest escalation of tensions in the Middle East, some Congressional Republicans have put the urgent need to help Israel ahead of Ukraine.

Massive capital flight from Russia in 2022
In 2022, US$253 billion of capital left Russia, equivalent to 13.5% of GDP. These massive capital outflows have depleted Russia’s already reduced foreign exchange reserves and contributed to the weakening of the ruble. According to the Central Bank of Russia (CBR), these exodus flows have been driven by foreign trade, loan repayments, private individuals withdrawing cash abroad and foreign direct investment. In 2023, the CBR is tackling this problem by significantly raising interest rates and the Ministry of Finance (MinFin) by introducing some form of capital control. Russian exporting companies, including the country’s main oil producers, are now obliged to sell their earnings from sales abroad on the domestic market for rubles, to ensure a supply of foreign exchange. Capital flight appears to be slowing in 2023, with US$27 billion leaving the country in the first six months of the year, according to the CBR.

G7 countries step up efforts to enforce Russian oil price cap
The Group of Seven-led coalition behind a price cap on Russian seaborne oil is redoubling its efforts to ensure its effective enforcement. The price cap is intended to reduce Russia’s ability to finance its war in Ukraine. India’s refiners are buying cargoes of Russian crude at the highest premium since the restriction was imposed by the G7 countries, according to data from the Ministry of Trade and Industry. Refiners at one key importer paid an average of US$86 a barrel for Russian supplies in August. This is the widest gap in dollar terms since the US$60 a barrel restriction came into force after the start of the conflict in Ukraine. The coalition statement made seven recommendations for industry including, a requirement for “appropriately capitalised” protection and indemnity insurance, agreed protocols on the use of Automatic Identification Systems and enhanced checks of high-risk ship-to-ship cargo transfers. 

Belgium to become the first country to get its hands on frozen Russian assets

Belgium hopes to collect €2.3 billion in taxes on Russian assets and use it to help rebuild Ukraine: €625 million from tax revenues in 2023 and an estimated €1.7 billion in 2024. The European Union and the Group of Seven (G7) countries have frozen more than 300 billion euros of Russian assets. More than 200 billion of this amount is held in Europe, of which around 125 billion is managed by the Belgian clearing house Euroclear. “We only needed EU approval to use the interest. We are simply applying the Belgian tax code, which is our competence,” a spokesperson for Prime Minister Alexander De Croo said. “Last year, it was very clear to us that taxation on the proceeds of those assets should go 100% to the Ukrainian population,” he added.

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