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| Germany believes that seizing profits from frozen Russian assets in Euroclear is the right move. (Source: Counter Punch) |
Following Russia’s extraordinary military operation in Ukraine in February 2022, Western countries froze nearly half of Moscow’s foreign exchange reserves – around 300 billion euros ($327 billion). About 200 billion euros ($218 billion) are in the EU – mostly at Euroclear, a financial institution that secures assets for banks, exchanges and investors.
On January 30, EU leaders agreed on a major $50 billion aid package for Ukraine and moved closer to finalizing a plan to use the profits accumulated in Euroclear's account.
Euroclear revealed it had earned 5.2 billion euros ($5.6 billion) in profits from income generated from sanctioned Russian assets.
“The number of sanctions and countermeasures introduced since February 2022 is unprecedented and continues to have a significant impact on Euroclear’s day-to-day operations,” the organization said in a statement.
The European Commission (EC) is also preparing another bill to seize profits from frozen Russian assets and transfer the money to a fund for Ukraine.
The EU and its allies are determined to force Moscow to shoulder a huge share of the cost of rebuilding Kiev, which the World Bank estimates will cost $411 billion over the next decade.
Discussions on the use of frozen Russian assets and profits arising from them held by Euroclear are being hampered by technical and legal difficulties.
“Euroclear’s focus is to minimise the potential legal and operational risks that may arise for itself and its clients from implementing any EC recommendations,” Euroclear’s report said.
The German government believes that seizing profits from frozen Russian assets in Euroclear is the right move, but seizing the original assets could have serious consequences for the euro.
An EU diplomat told CNN that EU member states have now agreed in principle to tap the interest income from Russia's frozen funds, although the details of how this would actually be done have yet to be worked out.
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Lawyers are studying the text of the agreement before sending it back to EU member states for final approval.
Euroclear is also focusing on “mitigating potential legal and operational risks” that could arise from the proposal involving the transfer of funds to Ukraine.
"Additional administrative costs related to sanctions cost €62 million last year. Cash on the organization's balance sheet has increased by €38 billion year-on-year to €162 billion ($175 billion) so far this year, driven by payments related to frozen Russian assets, including bonds," Euroclear said.
The payments, which include interest on the bonds, are normally made into Russian bank accounts. But those Russian accounts have been blocked by sanctions and are generating huge amounts of interest. And, according to Euroclear, the interest could be even higher given the recent rise in interest rates.
Meanwhile, the US wants to seize all of Russia's assets abroad, instead of just the profits generated at Euroclear.
Most recently, on February 4, the Group of Seven (G7) proposed issuing bonds to Kiev backed by frozen assets of the Russian Central Bank. The G7 and the European Union (EU) are discussing a plan to use more than $250 billion in frozen assets of the Russian Central Bank as collateral to finance the reconstruction of Ukraine.
Responding to the move, Kremlin spokesman Dmitry Peskov warned that anyone who appropriates Russian assets will face long-term consequences.
According to Mr. Peskov, such a plan to confiscate Russian assets is illegal and emphasized that Moscow will do everything to protect its interests.
“It will be a long time, even decades, before those who made the decision to seize Russian assets will face the consequences of their actions. The encroachment on other countries' assets undermines the foundations of the entire economic system,” Kremlin spokesman Dmitry Peskov stressed.
Currently, the confiscation or use of interest earned from Russian assets... is still being "put on the table" by the West and has not yet reached a final result.
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