When the G7 immobilized ~$300bn of Russian central bank reserves in 2022, it revealed that foreign exchange reserves are not risk-free assets — they are liabilities of the issuer's legal system. The mechanics matter: reserves held as cash deposits at foreign commercial banks (e.g., Euroclear, JPMorgan) can be frozen by the host jurisdiction, while reserves held as domestically-stored gold or in non-aligned jurisdictions (e.g., Chinese RMB, UAE dirhams) cannot.

The second-order effect is a reserve diversification premium: central banks now pay up for assets outside the sanctioning bloc's reach. This structurally bids gold, shrinks demand for G7 sovereign debt at the margin, and creates persistent upward pressure on term premia.

Immobilization = freeze, not confiscation (legal distinction matters for market pricing)
Confiscation = seizure + transfer, triggers sovereign immunity litigation risk
Repatriation = physical move of gold bars, slow and observable
Swap lines = Fed facilities that only extend to allied central banks

Reserve Type	Sanction Vulnerability	Liquidity
USD deposits at NY banks	High	Highest
EUR deposits at Euroclear	High	High
Gold in domestic vault	None	Low
RMB deposits at PBoC	Low	Medium