EU officials rule out confiscation of Russian central bank assets despite G7 talks

Senior European Union officials have indicated that the EU is unlikely to proceed with the confiscation of Russian central bank assets frozen in Europe. This decision comes despite G7 plans to discuss the legality of such a move at an upcoming meeting in February.

According to a Reuters report, the EU, along with the United States, Japan, and Canada, had frozen approximately $300 billion of Russian central bank assets in 2022 in response to Russia’s invasion of Ukraine, with a substantial portion, around $200 billion, held in Europe, primarily within the Belgian clearing house Euroclear.

While there are discussions within the G7 regarding the legality of confiscating these assets and redirecting them to support Ukraine’s war effort, European officials are cautious.

One senior official told Reuters, “Confiscation of the capital of the Russian assets is not going to happen. There is no agreement on this among EU member states.”

Luxembourg Foreign Minister Xavier Bettel expressed his reservations, stating, “Imagine if we decide politically to give billions to Ukraine. And in six months, we have a judicial decision saying we are not allowed to give it to them. Who will pay then?”

European officials are grappling not only with the legal complexities of seizing sovereign assets but also with concerns about potential repercussions for the euro currency. The fear is that investors might withdraw from euro assets due to apprehensions that their funds could be subject to seizure in the future. Additionally, Moscow has threatened retaliation by confiscating Western assets in Russia, potentially amounting to $288 billion.

Belgian Finance Minister Vincent van Peteghem, holding the rotating presidency of the EU until July, expressed caution about the possibility of confiscating Russian assets. He emphasised the importance of a legally sound proposal that avoids any impact on financial stability. Euroclear, a major player in this scenario, manages substantial amounts of assets in Russia, which, if seized, could pose a financial stability risk with significant repercussions.

Instead of outright confiscation, EU governments are leaning towards supporting a European Commission proposal from December. This proposal suggests taking over only the profits generated by the frozen Russian assets, leaving the principal untouched. This alternative approach could generate an estimated 15-17 billion euros over four years, which could then be directed towards supporting Ukraine.

(With inputs from Reuters)