If someone is looking for graphic proof that Vladimir Putin did not expect the strong reaction of the European Union to the invasion of Ukraine, they only have to follow the trail of the assets that the Central Bank of Russia had abroad before giving the order to attack. At the end of 2021, tens of billions of dollars left the dollar system en masse towards Europe. Four days after the invasion, all Russian assets in the Union – and not just the few remaining in the UK or the US – were blocked.
As investments in debt bonds and other products have come to maturity, the money has ended up accumulating at Euroclear, the Belgium-based clearing and settlement house. In its balance sheet there are some 191,000 million euros affected by the sanctions that Russia is unable to remove. Its protection against cyberattacks, Russian legal actions and political decisions has become a real nightmare for the group.
The fate of this coveted pile of money, which Kyiv claims to offset the costs of the war, has become the latest source of friction between the United States, from where there is talk of its outright appropriation, and the Twenty-seven, supporters of less risky approaches from a legal and monetary point of view. The EU has not done anything at the moment with the Russian money but on February 12 it agreed to legally separate the profits generated in the form of interest (about 4,000 each year) and in the coming weeks it will make a decision to use them in its aid to Kyiv . Washington wants to go further.
Nicolas Véron is an economist but asks not to lose sight of the political context in which the pressing calls from the White House to use that money occur. “It is impossible to understand the current discussion without taking into account the current asymmetry between the EU (which has demonstrated its willingness and ability to provide financial support to Ukraine) and the United States, which has no prospect of doing so in the short term given the context. electoral. The US is trying to change the conversation so that attention is not paid to Congress's inability to support Ukraine,” says Véron, whose analysis coincides with that made in European diplomatic circles.
The Union has ruled out the idea of confiscating the frozen funds, all its legal analyzes agree that they belong to the Central Bank of Russia and their ownership cannot be changed. “Transferring its property to Europe in the current circumstances would be extremely problematic from the point of view of the rule of law, the defense of which against Russia is very important for us,” says Veron, a member of the Bruegel think tank in Brussels, who considers more The defense of legality is more relevant than the possible monetary and geopolitical consequences.
The European Central Bank and the United States Federal Reserve have positioned themselves strongly against any step that could be perceived as a confiscation. “Central bankers fear for the reputation of their currencies. Because if we decide to keep Russian assets, other countries will think twice about keeping their money in euros or dollars,” says MEP Johan van Overtveldt (N-VA), former Belgian Finance Minister. As the headquarters of Euroclear, the Government of this country opposes any solution that puts financial stability at risk, a caution shared by the large EU countries.
Van Overveldt defends a third way between doing nothing or almost nothing and confiscating Russian assets: using them as collateral to request a loan so that money can be mobilized for Ukraine but without touching the original assets, whose fate would be decided in hypothetical negotiations. of peace. “The main advantage of this idea is that it would allow us to have quick access to a large sum of money,” explains the former Belgian minister on the phone, who also defends that it would create pressure on Putin to negotiate.
The spirit of Van Overtveldt's proposal has generated interest in the United States and the G7 has debated options in the same direction, using Russia's frozen assets as collateral to issue debt to Ukraine. Lieve Mostrey, CEO of Euroclear, reacted to this news by warning against the initiative, which she believes would carry the same financial stability risks for Europe as an outright confiscation. The latest G7 statement only talks about using the windfall profits generated by the assets and reiterates that any decision to use them for the benefit of Ukraine will be “in accordance with our respective legal systems and international law”, a position from which they have not budged. this week his finance ministers.
US Treasury Secretary Janet Yellen arrived at the meeting in Sao Paolo insisting on the “legal and moral” arguments to confiscate the funds (Washington maintains that it can adopt countermeasures against a country that violates international law) or use them as collateral. but her European colleagues stopped her. “It would be a mistake not to respect international law, it would weaken our credibility and legitimacy,” concluded Bruno Le Maire.
