The Belgian financial institution Euroclear has issued a warning about the use of frozen Russian assets. Using the €185 billion of blocked assets for the reconstruction of Ukraine could cause significant damage to the European investment climate. We must also be vigilant with regard to the legal steps that Moscow could take, the company writes.
Outside the EU the plan to use blocked Russian monies could be seen as ‘confiscation’. That is what Euroclear CEO Valérie Urbain writes in a letter to Commission President Ursula von der Leyen and European Council President Antonio Costa. The news was first reported by Britain's Financial Times, which was able to view the letter. Euroclear that is often dubbed 'the bankers' bank' has meanwhile confirmed the content of the letter.
Urbain sees major dangers emerging now that Europe after all has plans to use the money for the reconstruction of Ukraine. Seizing the money could set a dangerous precedent, the CEO writes. What could be the impact? Investors will be deterred from investing in European government bonds, resulting in higher interest rates.
Legal action on the cards
There's also a second warning from Euroclear: the legal action Moscow could take. ‘Russia could take legal action against us or seize assets,’ explains VRT NEWS journalist Rob Heirbaut, who is closely following the Euroclear dossier.
‘Euroclear wants guarantees that all countries will contribute to any costs if the money is used for Ukraine. Even though the European Commission has put everything on paper and, according to them, the plans are legally watertight. The question is also: how will the rest of the world view this?’
This is the company's clearest warning to date. ‘Previously, it always remained noncommittal, but has already warned of all possible outcomes.’
What is this about?
Since 2022, a large sum of money belonging to the Russian Central Bank has been frozen at Euroclear: around 185 billion euros. This is a sanction imposed by the European Union because of Russia's futher invasion of Ukraine.
The company has been making a profit on these Russian assets for years, which in turn has been feeding into the Belgian treasury through taxes. The Belgian government uses this money, which falls under military expenditure, to support Ukraine. The profits made by Euroclear itself are also skimmed off by the EU and channelled to Ukraine. However, the assets themselves have not yet been touched.
The European Commission now wants to go further and use the Russian money for the reconstruction of Ukraine. Only when the war is over, the sanctions are lifted and Russia pays Ukraine compensation for the war damage caused, would Ukraine have to repay the frozen Russian cash borrowed from Europe.
Belgian Prime Minister De Wever (Flemish nationaist) opposes this plan because it is not certain ‘whether this is legal’ and because of fears of legal action by Russia.
The decision on Russian funds is expected to be made at the next European summit (18 and 19 December). Whether the plans will be finalised by the end of the year remains to be seen. Now that US President Donald Trump is also eyeing the assets, the urgency is certainly much greater.
In his peace plan, Trump proposes redistributing the frozen assets. If it were up to him, part of the money would go towards rebuilding Ukraine and the rest to an ‘American-Russian investment fund’.
All eyes are currently on Belgium, VRT's Rob Heirbaut explains. ‘There is a lot of pressure on Belgium to agree to the plan, if only to keep the assets out of the reach of Trump and Russia.’