Stereotypically speaking, your average elite are in favor of more taxpayer support for Ukraine than your average hillbilly. But your average hillbilly is more willing to take seized Russian assets and give them to Ukraine then most members of the elite. As usual, the elite position makes no sense to the average hillbilly. You want to spend extra taxpayer money on Ukraine but you don’t want to spend Russian money that has already been seized? What kind of logic is that?

To be honest, I am a little bit in the hillbilly camp here. I am not sure I do understand the logic. But I have more faith in the average elite then most blue collar folks do in that I believe the elites usually have reasons for what they do. Often they are cowardly reasons. Often they are the result of trying to avoid making hard choices so that they can have their cake and eat it as well. But the hillbilly solutions are almost never as simple and consequence free as your average redneck believes. So I am presupposed to believe that there is a reason that your average elite is more willing to spend taxpayer dollars then seized Russian dollars to fund Ukraine. But that still leaves the question of why?

The main source of confusion is that I can’t get myself to believe the stated reason from the elites that “using Russian assets raises rule of law issues.” We have a situation where all Russian assets have been frozen by Western governments all over the world, and where Western countries are trying to enforce a price cap on Russia oil by using insurance regulations of all things, and were Western countries are sending intelligence and weapons over with the expressed goal of killing Russians. Supposedly all that is fine but using the seized Russian assets to fund Ukraine raised rule of law issues? This is particularly puzzling in light of the lack of concern for rule of law that the elites have shown in most other situations. It is all the more puzzling in the light of the fact that Russia has already seized most Western assets that were in Russia with no plans to ever giving them back. And to top it all off, the head of the Russia state has been charged with war crimes and can’t fly most countries in the world without fear of getting arrested. And yet, I am supposed to think that using Russian assets to fund Ukraine is a rule of law concern?

I think the rule of law concern sailed a long time ago. China for one has clearly seen western financial power being weaponized against Russia. After seeing the Swift payment system and insurance regulations used against Russia I don’t think it gives them any particular comfort that western powers have not “technically” spent the Russia money. If China really think they can sink American warships and kill thousands of American military personal in the process of taking Taiwan and still get all their money out of the US they are delusional. So even if you rephrase “rule of law” concerns as “China might get spooked and stop funding the US deficit” I don’t think you have a valid reason.

However, I do think concerns about the US deficit are closer to the real reason that the elites don’t want to take the Russian assets. Only, I don’t think the real concern is the US deficit. Most of the 300 billion dollars that were seized are in Europe. Strangely, the US which has very few of the assets is coming out in favor of using them to fund Ukraine whereas Europe (which has most of the money) is reluctant to do this on “rule of law” grounds.

I don’t think Europe is really concerns with the “rule of law”. I think they are concerned with what happens if there is a fire sale of 300 billion dollars of assets within the EU. After all, the 300 billion dollar figure is only the paper value of the money. To realize any of that money, Ukraine would have to sell those assets. But you sell bonds on the open market, you would have a fire sale that will crowd out borrowing that is needed to keep the EU countries’ economies functioning causing them to have pay more interest rates for their own borrowing. The EU is big and wealthy but the fire sale of 300 billion dollars worth of bond would likely make an impact on their fiscal markets.

This is why I think that some in the EU are advancing the idea that it is better for “rule of law” reasons to use the profits from those assets to fund the Ukraine war but not the assets themselves. From a logical perspective, this is absurd reasoning. If the law says the Russia owns the assets, then they own the profits as well. It is the rule of law equivalent of saying your house or car cannot be taken from you but you can be forbidden to ever get any kind of benefit or use from them. But if you ignore the logic and look at it from a potential harm to the EU perspective, saying that Ukraine can only use the profits but not the underlying assets makes a lot of sense.

Of course, it is not only the EU elites that don’t want to do this. From what I can tell there is also a large portion of US elites that don’t want to do it either. As I read the tea leaves it is the legal elites in the US who are more inclined to believe this is something that should be done where as the financial elites are the ones who don’t think this is a good idea. This would be strange if you thought rule of law was the real concern, but makes perfect sense if you think impact on the markets is the real issue.

I bring this up now because it looks it looks likely that taking Russian assets will soon be official American policy. Since the Biden administration is more dominated by the legal elites and the Republican Party is currently dominated by the hillbilly faction taking Russia money seems to be one of the few areas where they can agree on. So it is worth remembering that nothing in this life is without costs or as simple as it seems on the surface. In the particular case of America, it is not likely to matter much. Ukraine will not get much of a benefit, and the consequences will likely be minimal as well if only the Russian assets in America are taken. But if the US is able to bully the EU into doing it, we might see more consequences (and presumably more benefit to Ukraine as well).

I don’t really think this is likely but I have been surprised before. I never thought I would see the day when France was more hawkish about confronting the Russia then the US so who knows what other surprised are in store. And as far as I can tell, the average man on the street in the EU does not understand why his tax dollars are funding Ukraine and yet the Russian money is untouched. Blue collar logic is pretty similar the world over. So I think the EU faces popular pressure to make this happen in addition to the growing US pressure.

If I had to guess, I would say that the end result will be some kind of compromise that tries to avoid the worst impacts of a fire sale while still giving Ukraine some “free aid.” Half measures seem to be the rule of the Western world so the end result will probably be some more strain on bond markets but nothing too extreme. By the same token, the extra help to Ukraine will help keep the conflict alive but not do anything to resolve it.

The thing that makes me uncomfortable about all this theorizing is that I can’t find any documentary support for what I think the “real” reason for reluctance to use Russia assets is. Normally when I talk about “elites” I know I am stereotyping but I can find lots of written documentation from high end news papers and think tanks that lay out what I am claiming as the “elite” opinion. So even though claiming that an ill defined group of “elites” exists is to a certain extent making things up (or at least oversimplifying) I can at least justify it on the grounds that those ideas are clearly out there and putting in all the necessary caveats and waffling required by strict accuracy would make my writing even more unreadable then it already is.

But in this case I can find lots of people laying out the case for using the Russian assists. On the anti side, all I can find is people mumbling about rule of law without laying out clearly what all those legal lines are that have not already been crossed by all the unprecedented actions that have already been taken against Russia. So I have made up a reason that made sense to me and ascribed it to elites who have never gone on record as saying that is their real concern.

In other words, take all the above with a large grain of salt.