Why EU plans to tap Russia’s frozen assets are moving forward
Defrosting
European efforts to tap into the revenues from immobilised Russian central bank assets received high-profile backing last week from Janet Yellen, the US treasury secretary.
Meetings in Brussels and Luxembourg today will show whether this can help overcome the difficulties of bringing the plans to fruition and funnelling the cash to Ukraine, writes Sam Fleming.
Context: The G7 allies froze more than $300bn in Russian central bank reserves following Russia’s full-scale invasion of Ukraine in February last year. The majority of those assets is caught in Europe, suspended in Brussels-headquartered Euroclear, the world’s largest clearinghouse.
Rather than seize the assets, some officials have advocated a levy on the excess, or windfall, profit made by Euroclear.
EU experts will meet in Brussels today to discuss how to move things forward, following a much-needed thumbs up by the G7 last week of the plans. EU finance ministers are holding separate talks with Yellen in Luxembourg today, during which they will also touch on the issue.
Belgium last week said it would use the corporate tax it already collects on Euroclear’s profits from the Russian assets to create a €1.7bn fund dedicated to Ukraine.
Mairead McGuinness, the financial services commissioner, told the FT that the move by premier Alexander De Croo’s government was “the start of something significant”, and that it was now up to member states to discuss further steps.
“We need to make Russia pay and this is the start of that process,” McGuinness said.
France’s finance minister Bruno Le Maire told the FT last week that he wanted experts to work on the plan through the end of the year, with the hopes of already using revenues from the Russian assets next year to support Ukraine.
But the discussions remain legally complex. The European Central Bank is still worried that if the EU seizes profits made on assets held by a foreign state, other central banks will drop their euro-denominated assets for fear of suffering the same fate — and endanger the whole currency.
Representatives of the ECB will attend the expert meeting in Brussels today.
While the G7 acted with extraordinary speed when it first froze the Russian assets, reaching a deal to tap into the proceeds would be far more laborious.