EU leaders are reluctant to seize the frozen billions, fearing retaliation and damage to the euro
President Joe Biden is pushing his fellow Group of Seven (G7) leaders to make progress on a plan to use frozen Russian assets to fund Kiev by the time they meet in June, Bloomberg reported on Thursday, citing people familiar with the matter.
While the UK and Canada both advocate the seizure of blocked Russian sovereign assets for use funding Ukraine’s military and reconstruction, France and Germany both have reservations.
Most of the funds are located in the EU, primarily at the Belgium-based clearing house Euroclear. Making too strong a move without clear legal justification may undermine the euro’s status as a reserve currency and do other harm to the bloc, its leading economies believe, according to Bloomberg.
There is also the threat of a response by Moscow. Russia has condemned the freezing of approximately $300 billion of its national wealth as illegal, and has warned that any move to confiscate the money would be criminal.
Last month, the European Council took measures aimed at imposing a windfall tax on profits generated by the Russian funds and sending proceeds to Ukraine. The Russian Foreign Ministry said Brussels was trying to “create the illusion of legitimacy over attacks on our property and thereby camouflage what is in fact outright theft.”
There are Western assets of similar value under Russian jurisdiction, which can be targeted in retaliation, Russian Finance Minister Anton Siluanov said in an interview last week.
“This is not a question for us; we are following the decisions of Western countries,” he stated. “Any actions with our assets will receive a symmetrical response.” Other global players have been closely watching the developments and have adjusted their policies accordingly, the minister noted.
For example, the Chinese, whose foreign reserves exceed $3 trillion, according to the State Administration of Foreign Exchange, “are reducing their exposure to American securities” as a consequence.
EU nations are reportedly considering other options for making frozen Russian assets play in Ukraine’s favor without resorting to an outright seizure. For example, they could be offered as collateral to lenders for money borrowed on Kiev’s behalf.
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Ultimately Western nations want Moscow to willingly pay damages to Kiev for the Ukraine conflict, before restoring its control over Russian assets.
