EU will increasingly have to answer why Russian Central Bank assets are not being used to support Ukraine - sanctions expert

  • 2024-03-26
  • LETA/TBT Staff

RIGA - European Union (EU) policymakers will increasingly have to answer the question of why frozen assets of the Russian Central Bank are not being used to support Ukraine in its war against Russia, Tom Keatinge, director of the Center for Financial Crime and Security Studies at RUSI, a UK defense and security think tank, told LETA in an interview.

He stressed that the focus on frozen assets in Europe has shifted over the past year from oligarch assets to the assets of the Russian Central Bank, as the expropriation of assets from private individuals will always be a "very specific red line".

"But it is evident that the question is increasingly being asked: how can we ask EU taxpayers or US taxpayers to foot the bill for another EUR 50 billion in support of Ukraine when there are EUR 200 billion or however many billions in the Russian Central Bank's account in Belgium?" Keatinge asked.

He acknowledged that the EU needs to explore all possible aspects before taking a decision, but there is a downward spiral being observed where there is a tossing and turning between "no, we cannot confiscate assets, maybe we could tax them as income" and various other ideas.

The expert expressed the hope that at the G7 summit in Italy in June, the leaders will come to some positive decision on this issue, which will be more than just taxing the assets of the Russian Central Bank, because in this case it would only be about four billion euros.

"I think the legal arguments are also pretty well settled, there is a good legal analysis that says that there are ways in which these assets could be transferred to Ukraine. Now we have to get people like Christine Lagarde, the president of the European Central Bank, to stop telling political leaders that, you know, if you do this, you could create distrust in the euro. I think that is a silly argument. The assets of the Russian Central Bank were frozen two years ago and the euro did not collapse because of that, people did not suddenly sell all their euro assets because they can no longer trust the euro," said Keatinge.

He pointed out that, of course, market volatility is possible as a result of such a decision, but in the years following the 2008 financial crisis and the euro area sovereign debt crisis, the EU set up mechanisms to support markets in case of volatility. Of course, no one would want to use these mechanisms again, but at least they exist and there is already some experience of how to deal with this type of problem.

Keatinge also reminded that one of the arguments against the transfer of Russian Central Bank assets to Ukraine is that the Kremlin will retaliate by seizing European companies in Russia. "But, you know, we are at war! Let us be honest about this! If we think that Danone or any other company is more important than the future of Ukraine, then we have a problem. We have to recognize that, yes, there will be economic consequences. But we have had two years to prepare for them!" stressed the expert.

As reported, the EU High Representative for Foreign and Security Policy, Josep Borrell, has announced that the European Commission (EC) will propose using the profits from frozen Russian assets to help arm Ukraine. The EC envisages that 90 percent of the profits from the frozen Russian assets would be channeled into a fund to cover the cost of arms for Ukraine. The remaining 10 percent would be transferred to the EU budget to help increase the capacity of Ukraine's defense industry.

The EU, the US, Japan and Canada froze around USD 300 billion in Russian Central Bank assets following Moscow's re-invasion of Ukraine in 2022. Around USD 200 billion of these funds are held by European financial institutions, mainly the Belgian clearing house Euroclear. EU countries have so far been unable to agree on what to do with the frozen Russian assets.