Known immobilized assets belonging to Russia’s central bank over €1bn (€bn)

  1. Total G7, EU and Australia: € 260 bn
  2. Total in EU: € 210 bn (includes cash and government bonds denominated in euro, dollar and other currencies)
  3. Belgium: € 191 bn held at Euroclear central securities depository)
  4. France: € 19bn
  5. Switzerland: € 7.8 bn
  6. U.S. € 4.6 bn

Legal grounds for seizing assets

The idea of confiscating Russian sovereign assets is legally fraught. Central bank assets are protected under customary international law; actions that appear to cast doubt over that principle would have profound implications for the financial system. But advocates argue that such a confiscation can, in this case, be justified under international law as an equitable remedy to push Russia to compensate Ukraine for war damages.

Financial consequences

Opponents worry that such a move would damage the international rules-based order and undermine the trust that countries show when they place reserves with other nations. The latter argument carries considerable sway with some EU member states and the European Central Bank. Confiscating Russian assets would, for some, cross a line by suggesting to countries such as China or Saudi Arabia that sovereign assets stowed in euros or dollars might not always be safe. The ECB earlier this year warned member states of the risk of undermining the “legal and economic foundations” on which the international role of the euro rests. “The implications could be substantial,” it said, according to an internal EU note. It warned the bloc of the risks of acting alone and recommended for any action to be taken as part of a broad international coalition.

How do the Europeans view these arguments?

Officials are aiming for a consensus among G7 countries to seize the assets, but France, Germany and Italy remain extremely cautious. European officials fear possible retaliation if state immunity is undermined. One noted the US holds only a very small amount of Russian central bank assets by comparison. From an EU perspective Europeans have much more to lose. Russia’s options to counter with litigation are limited. However, Russia will find other ways to reciprocate . . . that would mean inflicting more harm on businesses in Russia and potential other damages

What is Europe planning instead?  

The Commission is putting forward a “proposal on the immobilization of extraordinary revenues, so-called ‘windfall revenues’, of the Russian Central Bank’s assets. The Commission recommends that financial institutions put all profits stemming from the Russian Central Bank’s assets on separate accounts once the decision is adopted. This would mean to immobilize the net profits and secure them so it can be used in the future. The step comes after EU countries urged the Commission to look into legal ways of using the stream of revenues from the Russian central bank’s money immobilized in the bloc to help rebuild Ukraine following Russia’s attack on the country. The European Commission estimates there is around €200 billion of the Russian Central Bank reserves frozen in the EU. The draft proposal, which is not public and has been sent directly to national capitals, however, falls short of proposing ways to do so. The member states will later take a decision in this regard, based on a future proposal by the executive. Because it is unprecedented, each step needs to be carefully assessed and discussed. More hawkish Eastern and Central European member states have pushed for the move, while some countries such as Belgium, Estonia, and the Czech Republic have already started looking into how to use freezes within a national context.

More than €100 billion of frozen Russian assets are stuck in the Belgium-based Euroclear and have generated around €3 billion according to the clearing house’s data since the beginning of Russia’s war on Ukraine.

There is good reason to consider that these revenues should be used to help the reconstruction and recovery of Ukraine, that is the long-term objective. The short-term objective is to make sure this is possible. First, forcing the central security deposits (CSDs) to manage and register separately those revenues so they can be identified in the accounting system, and secondly, these net profits from today would be prohibited to redistribution to shareholders and third parties, so they have to stay in CSDs.” That way, the Russian Central Bank’s money will not be touched by the future steps, only the profits.

Those can be used for Ukraine since they are “exceptional” and “only exist because of the immobilization. It is a direct consequence [of the sanctions.

The European Commission did not give any estimation as to how much cash could be generated from the move, which is also supported by the world’s biggest economies.

The G7 will explore how “extraordinary revenues held by private entities stemming directly from immobilized Russian sovereign assets could be used to support Ukraine’s reconstruction, the group said in a statement in October 2023.

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