While the US and Europe have frozen (but not confiscated) hundreds of billions of foreign reserves belonging to Russia’s Central Bank, a push to also strip Russia of $17 billion in SDRs has apparently fizzled.
So instead, the IMF has decided to remove Russia’s representative to the IMF from his largely ceremonial role, “honorary” dean of the IMF’s executive board. The move was first proposed by Canada, and was immediately backed by the US: Here’s more from FT:
Canada, the US and the UK want Aleksei Mozhin, Russia’s representative at the IMF, to relinquish or be stripped of his title as honorary head of the executive board of the multilateral lender following the invasion of Ukraine. Canada first proposed that Mozhin give up the title of dean of the IMF board during a meeting on February 25, a day after Russia unleashed its attack, according to people familiar with the matter.
The US backed the effort during the same meeting and the UK is also supportive of his removal from the position, the people added. Mozhin has been dean of the executive board since 2015, a largely honorary title conferred to the longest serving member which carries no official responsibilities or authority.
Kristalina Georgieva, the managing director of the IMF, chairs the board and is responsible for calling meetings, setting the agenda and facilitating the discussion.
Typically, the dean of the board is a title bestowed on its longest-serving member (which is, in this case, Mozhin). Their only real responsibility is that they step in to speak for the board if there’s ever an issue with the executive director (which actually happened last year when Kristalina Georgieva, the managing director of the IMF, was accused of manipulating economic data on China’s behalf).
As one former IMF official acknowledged to the FT, the dean role is “kind of irrelevant”.
“On an operational basis [the role] is kind of irrelevant,” said a former senior IMF official. “But these are unusual times and certainly the signalling aspect of not having a Russian be in that slot would be meaningful.”
Mozhin didn’t respond to a request for comment from the FT. He hasn’t shown any “willingness” to give up the title, the FT said, and it’s still unclear whether the west’s mechanism for removing him from the role will work.
The FT also noted that removing Russia and its voting power from the organization would be impossible unless Russia stopped meeting its annual financial obligations.
The bid to strip Mozhin of his title is part of a broader effort by western nations and many others in the international community to isolate and punish Russia for the attack on Ukraine – from economic sanctions to condemnation within multilateral institutions.
Within the IMF, a much more significant step would be to try to deny Russia its voting rights on the board, but this would require overwhelming support within the board as well as an assessment that Moscow had failed to meet its obligations to the Fund based on economic and financial criteria, which could be hard to prove. Russia’s share of voting power at the IMF is 2.59 per cent, compared with 16.5 per cent for the US.
Meanwhile, some western IMF members have been weighing how to deny Russia the ability to convert $17bn in special drawing rights, a form of reserve asset issued by the IMF, into hard currencies like dollars, euros or yen, to circumvent the sanctions placed on its central bank.
The US insists that it’s “committed to taking all measures to prevent Russia from using its SDRs”.
“The US is committed to taking all measures to prevent Russia from benefiting from its holdings of IMF SDRs,” a US Treasury official told the Financial Times, adding that Moscow “would face significant, even insurmountable, hurdles to use its SDRs.”
“The United States and our partners, comprising the large majority of available counterparts in the IMF’s SDR transactions system, will not undertake SDR exchanges with Russia.”
Mozhin arrived at the IMF shortly after the Soviet collapse in 1992, initially serving as an alternate executive director before becoming Russia’s main representative in 1996. He was promoted to dean of the board in 2007.