The $300 billion in Russian assets frozen at the start of the full-scale invasion is causing more and more debate. Western partners seek to use them to help our country, but see the ways of such help in different ways.
The United States and Great Britain advocate confiscation. Instead, a number of countries, including France, Germany, and Italy, have objections. Italian Finance Minister Giancarlo Giorgetti, who chairs the G7 this year, believes that it is “difficult and difficult” to find a legal basis for the confiscation of Russian state assets. Some structures, in particular the international depository Euroclear and the International Monetary Fund, are also against the confiscation. They fear the confiscation could set a bad precedent, leading to legal challenges, financial instability and seizures of Western assets abroad.
The fate of frozen Russian assets will soon be decided by the Big Seven. This issue will be at the top of the agenda at the G7 summit in June.
So there is currently no consensus among Western countries, but there are two plans.
The plan is European
Protesting against the confiscation, the EU is simultaneously initiating the use of most of the interest received from Russian assets frozen in Europe. It is expected that the corresponding plan will be adopted as early as next week. He will help arm Ukraine and make Russia pay for the restoration of our country. European states have agreed that 90 percent of the profits for the purchase of weapons for Ukraine will be used through the European Peace Fund, which is the EU’s structure for financing military aid and its own military missions. The remaining percentage will go to reconstruction and non-lethal purchases to satisfy the militarily neutral countries of Ireland, Austria, Cyprus and Malta.
The European proposal focuses on the profits of Belgium’s central securities depository, Euroclear, which holds about 190 billion euros of Russian central bank assets. Since the beginning of the year alone, the company has received €1.6 billion in interest from them. About this in an interview with L’Echo said Valerie Urban, CEO of Euroclear, which warned against the complete confiscation of funds, comparing it to “opening Pandora’s box”.
Already today, according to the head of the international depository Euroclear, more than 100 employees of the company are involved in the management of frozen Russian assets, and more than a hundred proceedings have been opened against the depository itself in Russian courts, and the probability that they will be won is very small.
Complete confiscation, according to Valery Urban, will lead to negative consequences for all financial markets, and international investors will “turn their backs on Europe”.
Cautions regarding confiscation are also expressed in the International Monetary Fund. It is important for the IMF that any action has a sufficient legal basis and does not undermine the functioning of the international monetary system. This is stated in the extensive report “Geopolitics and its impact on world trade and the dollar” on the official website of the Foundation.
The plan is American
The United States owns a small amount of Russian assets, estimated at about $5 billion. At the same time, they propose to transfer about 60 billion dollars to Ukraine, and then use the profits from Russian assets stored in Europe to repay the debt over time.
US National Security Adviser Dalip Singh, who is said to be a key architect of Western sanctions against Russia, scientifically justifies legal conflict and indicates a way out of it.
He proceeds from the fact that Ukraine has an undoubted claim under international law to compensation for damages caused by Russia’s unprovoked actions. But at the same time, Russia also has legal ownership of the assets of 300 billion US dollars, which are held on behalf of the Russian Central Bank and the Russian Federation and which have been frozen by the G7 countries since 2022. The problem here is obvious: Ukraine has the right to reparations, but does not own Russian assets, while the G7 countries have frozen assets, but do not have the right to compensation. Dalip Singh proposes to implement a transaction by which a part of Ukraine’s claims to Russia for military damages can be transferred to the “Big Seven” countries, which can legally and practically offset this debt from preserved Russian assets.
As you know, after two years of debate in Congress, US President Joe Biden signed the Restoration of Economic Prosperity and Opportunity for Ukrainians (REPO) Act, which gives him the authority to confiscate Russia’s already frozen state assets. At stake is a relatively small amount — less than 2 percent of the total volume of Russian assets frozen by other states. However, how the United States acts will influence European countries, set legal precedents, and shape future US policy choices.
Alternative opinion
Former British diplomat, employee of the Nigel International Institute for Strategic Studies Gould-Davis opines, which partly allays the concerns of supporters of both European and American plans:
“The freezing of assets was a much more decisive step than their confiscation and did not cause any market turbulence,” the analyst noted. for the safe custody of large sums of money. The rule of law, which is often an obstacle to quick and effective action in democratic countries, provides a decisive advantage in this case.”
The former diplomat calls on the West to use its advantage in resources for its security imperatives and urgently develop an effective geo-economic strategy.
“As Russia and Ukraine depend on external support, the capabilities and choices of the states that supply it will likely determine the outcome of the war.” – summarizes the former diplomat.
The finance ministers of the G7 will meet in Italy next week. An official representative of the Ministry of Finance of Italy yesterday stated Reuters agency that the G7 will support the European Union’s plan to use the proceeds from frozen Russian assets to help Ukraine in military operations.
