The European Commission plans to allow Euroclear, a Belgium-based financial service, to use some of the interest profits of frozen Russian assets to protect a €45 billion G7 loan to Ukraine from potential retaliation from Russia.
Euroclear, which manages the aforementioned Russian assets, has suffered significant losses due to Russian sanctions, so such a solution could serve as a last resort to ensure compensation, according to Hungarian outlet Portfolio.
According to supporters of the proposal, the profits from €200 billion in frozen Russian assets could be used to repay Ukraine’s debts. This would focus strictly on interest profits instead of tapping directly into the €200 billion in Russian money.
Euroclear is currently subject to a number of legal proceedings, most of which are taking place in Russian courts, and the sanctioned parties are seeking compensation.
Although these courts do not have direct authority to move assets denominated in Europe or the United States, they may take retaliatory actions against Euroclear balances held with Russian financial institutions, which may trigger further claims by Western financial institutions.
Euroclear has set up an “emergency fund” in which it reserves about 10 percent of profits from frozen assets for litigation, but some EU officials say it would be more cost-effective to tap directly into some of the Russian assets. However, this solution may raise questions regarding compatibility with international law.
Western financial institutions, including the European Central Bank (ECB), have previously warned that the direct transfer of ownership of Russian assets could undermine confidence in the eurozone’s role as a financial center and the euro’s role as an international reserve currency.
In addition, to actually tap into the funds directly would be a decision that requires the unanimous approval of the EU’s 27 member states, which makes implementation difficult, especially since Hungary continues to block this policy.
