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| Using frozen Russian assets to rebuild Ukraine may seem appealing, but the implications are huge. Illustrative photo. (Source: FT) |
Ms. Mostrey said that the above idea of the Group of Seven leading industrialized countries (G7) is similar to a form of indirect asset confiscation and increases the complexity of using another entity's assets as collateral.
The Euroclear CEO further highlighted the potential impacts of such actions on the wider financial ecosystem, particularly with regard to confidence in Euroclear, European capital markets and the Euro as a currency.
“I believe that caution and reason will prevail,” she said.
The West is moving closer to seizing some $300 billion in reserves from the Central Bank of Russia (CBR). The US has pushed for the entire amount to be seized and handed over to Ukraine, and passed a law that will take effect in December.
Europe, however, has been much more reluctant. Several EU countries have repeatedly expressed concern about the damage it would do to the European banking system and investor confidence in the euro.
Currently, about two-thirds of the frozen funds are in Europe, with the majority invested in assets held by Euroclear.
Brussels has offered various compromises. On February 12, the European Council (EC) ordered all banks and financial institutions holding assets of 1 million euros ($1.08 million) or more from the Russian Central Bank to keep interest accrued after EU sanctions in separate accounts.
The EC also banned the above organizations from handling any interest or profits from Moscow's frozen assets.
Brussels officials explained that this move paves the way for the Council to decide on establishing a financial contribution to the EU budget from this profit to support Kiev in the current period as well as in the future recovery and reconstruction process.
The plan is expected to retain CBR's principles and assets.
Euroclear said the revenue is estimated at more than 4 billion euros a year. Ukrainian Foreign Minister Dmytro Kuleba immediately welcomed the decision, calling on the supporting countries to go further.
Another European proposal to tap the source of capital currently under discussion is to use frozen assets as collateral.
Still, Ms Mostrey expressed skepticism about the CBR's ability to respond to such measures.
Foreign Policy also noted that using frozen Russian assets to rebuild Ukraine may seem appealing but the implications are enormous. Freezing and seizing CRB reserves comes with economic, financial, and geopolitical implications that must be carefully considered.
Responding to the EU's proposals, on February 14, the Russian government warned that it would take appropriate legal action if the West confiscated its assets.
Kremlin spokesman Dmitri Peskov said that the confiscation of assets belonging to other countries in one way or another will have an impact on the world economy.
He also warned that Russia would respond with legal action: "Russia's position is simple and clear. The West is trying to seize Russian assets. This is an attempt to encroach on private property and is illegal. Russia will respond with appropriate legal action against all those involved in making and implementing such decisions.
“We have repeatedly said that decisions to seize property owned by others will affect the rule of law, economic development prospects and the investment climate in general. This can become a serious shock to the pillars of the world economy,” the Kremlin spokesman stressed.
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