The European Central Bank (ECB) on Friday privately warned the European Commission against tapping interest from frozen Russian assets, the Financial Times reported, citing a draft internal note from the ECB’s governing council.
EU lawmakers have been mulling ways of deploying some of the proceeds for the restoration of Ukraine, which faces a huge reconstruction bill once the conflict with Russia ends.
According to the report, the ECB fears that such actions could encourage other central banks that hold large forex reserves to “turn their back” on the euro, especially if the EU decides to act alone and not in a joint move with G7 countries.
“There is no disagreement that this is morally the right thing to do, but the ‘how’ is very difficult. You can’t skirt the rule of law. And if you find something that is legally tenable what are the implications for the euro’s standing as a global currency?” an unnamed EU diplomat told the newspaper. He added that the commission is finalizing proposals on the potential tapping of frozen Russian assets, which are expected to be unveiled later this month.
EU securities depositories have seized some €196.6 billion ($215 billion) in Russian assets since the start of the conflict, the news outlet noted, adding that Belgium-based Euroclear alone generated €734 million ($805 million) of interest on cash balances from Russia-sanctioned assets in the first quarter of 2023.
In total, Western governments have frozen about $300 billion in Russian central bank assets since the start of Russia’s military operation in Ukraine, and seized more than $80 billion worth of assets belonging to Russian citizens and businesses. While addressing the St. Petersburg International Economic Forum (SPIEF) on Friday, Russian President Vladimir Putin described these actions as “medieval.”
“Many businessmen were stunned to see that their accounts in the West were frozen. It never crossed anyone’s mind. This is robbery. They closed them, took them away and won’t even explain why. It’s shocking. It’s like the Middle Ages,” the Russian president said.
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