March 1, 2024 - 6:00am
European Commission President Ursula von der Leyen is attempting to “restart a conversation” on using profits from frozen Russian assets to support Ukraine. The important detail here is that this would not include the confiscation of the assets themselves, but would be limited to the profits they generate. The Russian Central Bank has more than €200 billion (out of €269 billion globally) frozen in European accounts, and this money is generating interest, both in the literal and financial sense.
What might seem simple at first glance, however, is in truth a complicated geopolitical and legal issue. While the freezing of assets is acceptable under international law, seizing, for the most part, is not. Some heads of state recognise this reality: Belgium’s prime minister, Alexander De Croo, recently emphasised the need for a structural solution that does not destabilise the international financial system. Given that his country finds itself in possession of the majority of frozen Russian state assets (around €180 billion), he clearly understands better than most what is at stake.
The macroeconomic repercussions of such a step would be quite significant, making Europe a less attractive destination for international investment flows. Which is why the idea itself is not particularly new and has been floating among G7 states since October 2023. But even then, the language was vague: “We will explore how any extraordinary revenues […] from immobilized Russian sovereign assets […] could be directed to support Ukraine […]”. Given that the euro is a global reserve currency, the move could deter many countries, including India and China, from holding assets in the EU if they feel that they can be seized with relative ease.
Behind closed doors, policymakers are considering what such a move could mean for the international financial system once the war is over. Though nobody is willing to say it out loud, few Europeans would be happy with a permanent loss of future Russian assets.
There is also the more cynical possibility that all the talk about more aggressive sanctions is part of the upcoming campaign season in Europe. Ursula von der Leyen wants to run for a second term as president of the European Commission, and being tough on Russia is as much a geopolitical position as it is part of a reelection campaign. A similar game is currently being played by French President Emmanuel Macron, who recently talked about putting Western troops into Ukraine, which is probably as unlikely as the seizing of Russian assets.
Given that campaign season is only in its early days, European voters should get ready for multiple proposals from their leaders, but should not expect too much when it comes to their implementation.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeIf they can’t even ban Russian athletes from international sporting competitions, I’m not holding my breath.
They technically did, but honestly why should they? I don’t recall the English and Americans being banned from anything after Iraq.
Why would they have been? Tyrannical dictators are baddies, whether they are Iraqi or Russian.
If invading countries is the criterion by which athletes get banned, then they should have been. It’s not a difficult concept as far as it goes – the Russians at least had more of a pretext than “rumor has it here be WMDs” (I’m referring to the shelling of ethnic Russians, not the Nazi stuff).
Also, Bush, Blair, etc are also tyrannical baddies, just not to you.
Bush and Blair were democratically elected politicians, not tyrannical demagogues.
To the extent that the Ukrainians “shelled ethnic Russians”, they shelled ethnic Russians who were in Ukraine, not in Russia. That is not “invading another country” that is “fighting separatists in their own country”.
I can’t think of another country in the world that would tolerate a neighbor on their border murdering 20,000 of their ethnic brethren. If American expats were being murdered by the Mexican government, the US would make Mexico into a parking lot.
Good guys and bad guys, huh? I see you still base your understanding of realpolitik on 1980s Hollywood action movies.
The 1980s were the time of the collapse of the USSR.
Not everyone remembers these times with regret and complaints about stupid Hollywood action movies.
Moreover, reality demonstrates that the division between good guys and bad guys has not lost its meaning. You just need to take a closer look at reality, and not at the post-truth MSM
Or USA corporate capitalists + Hindu of Indian sub continent ethnic origin avatars shoehorned into power to enact the edicts of their hidden masters and get paid handsomely for it,and no “democratic ” voting involved.
Hear hear!
A good article: short, informative and to the point. Other correspondents please copy.
Russia has expropriated Western assets without compensation. Not saying we need to lower ourselves to their standards. Just pointing it out.
How has the West not already expropriated Russian assets? What about the $300 billion in gold bullion? The mega yachts of private individuals?
Given that the USA is blocked by Republican Party political posturing from defending European democracy, it is beginning to look like it has become a stark choice of either appropriating frozen Russian funds to save the Ukraine from being overrun by Russian aggression or saving the reputation of European banks for being a safe-haven for deposits from tyrannical aggressor States. Hmmm… I wonder what is most important to the political authorities in the EU?
At this point the US proxy war is lost. Even the posturing clowns in Congress can see that. Some of them even understand the folly of throwing good money after bad and depleting their own weaponry in a lost cause.
It will take an awfully high rate of interest on that $200bn to replace the $60bn the US is not sending to Zelensky’s oligarchs.
The US politicians had no delusions that Russia would lose to its little neighbor. They padded their Swiss accounts for as long as they could and now they will, as they always do, abandon their patsy for the Middle East and China. More death and destruction to be had there.
Why have “we’ got to save Ukraine. It’s a far off country of which I know little and care less. I don’t like Ukranians. One stole my friends partner,expropriated all his money off him then left. They are sly,horrible users. I wouldnt give one house room. But then men love being ripped off by those hot chicks from the east.
Of course, Russians would do anything like that. They’re as honest as the day is long….
Explain to me again why the Republican Party should concern itself with European democracy? Maybe Europe should pass the hat so Americans can have healthcare.
Surely those financial institutions that ‘look after’ the Russian assets can do what many banks do and increase the charges for looking after the assets. If such charges are substantially higher than the interest the assets attract and governments introduce an emergency ‘bank’ tax to relieve the financial institutions holding the assets of the bank charges, the value of the assets could be engineered into a rapid decline in value until overdraft changes are applicable. Might concentrate the mind of that gangster Putin.
Wouldn’t account holders have to agree to that? And if they don’t wouldn’t the institutions have to send the assets back to the account owner?
It’s theft. Whoever money it is,it’s theft.
You strike me as being a rather naive person. Jane. So you are of the view that criminals I’ll gotten assets should be entirely untouched by the state?
He’s not reached the highest level yet occupied by Daddy Biden.
Clearly the EU is behind the times on this. In the US, all a government has to do is vaguely assert that cash in a bank or on a person passing through an airport has”‘probable cause” to be drug-related, and it can seize the asset without the inconvenience of due process.
That’s theft. That’s stealing. If they do that they can steal our money,if you have any,but they fully intend to anyway.
Didn’t the Russians seal a lot of leased airliners?
One step closer to a global reserve cryptocurrency backed by Saudi and Russian oil. If Europe and the US were forced to buy oil using the new currency, the West would revisit the dark ages in a matter of months. Seizing assets under your care is a prescription for not having assets under your care.