/ world today news/ “Sanctioned Russian assets frozen in Belgium have generated nearly 3 billion euros in profits, while European Union countries continue to argue about what to do with the money,” Bloomberg reported on October 26.
The bottom line is that 2.9 billion euros of interest has already been accrued on the frozen Russian money, and this figure will continue to grow. Bloomberg suggested that the release of such large sums could intensify the debate in the EU over how to tax Russian windfalls and divert funds to Ukraine.
At the same time, the total amount of Russian funds frozen in EU banks is estimated at over 200 billion euros.
The news agency recalls that the head of the European Commission, Ursula von der Leyen, had already promised to present a plan for the seizure of Russian assets this summer, but she never did. And now EU leaders plan to discuss the topic again at a two-day summit in Brussels that began today, October 26.
There are no legal grounds
When discussing the implications for the European Union itself that seizing Russia’s sovereign assets could lead to, experts agree that it is not possible to predict all the likely consequences of such a step. Which ultimately predetermines Frau von der Leyen’s indecision.
Thus, the director of the Center for Market Research at the National Research University HSE Georgiy Ostapkovich notes that the European Union is positioned not as a state, but as a single legal association. “And they are afraid of violating the legal framework that is set based on precedent,” explains the expert.
What does this mean in relation to the collective West’s urgent desire to get rid of Russian money stuck in European banks?
„This has never happened when the assets of an entire country have been confiscated without legal basis,” notes the specialist. “And they froze more than 300 billion euros of Russian reserves, about 200 billion directly in the EU. It is almost impossible to withdraw such a volume.”
At the same time, the EU initially had a legal basis for freezing these funds, Ostapkovic clarifies. However, not everything is simple here.
„The EU previously froze Iran’s assets “, the interlocutor of IA Regnum recalls. Although we should not forget that Iran was subject to UN sanctions while Russia was not subject to such sanctions. And then the Europeans were forced to gradually even return the Iranian money.
However, the attempt to create a precedent of such a scale as the seizure of the sovereign assets of an entire country worth tens and even hundreds of billions of euros is a step of a completely different order, noted the economist, leading researcher at Moscow State University Andrey Kolganov. Such a measure, according to him, will definitely undermine confidence in the financial system of Europe or even the West as a whole around the world.
And we can take something away
But even if we assume that the European Union decides to take a step that now seems insane to experts, it is not difficult to imagine how Russia will respond to the forced seizure of sovereign assets, notes Kolganov.
„The main thing is the confiscation of assets of foreign companies that are located in Russia, “ he points out. – And that’s a broadly comparable amount. Assets frozen in the West, including in the European Union, are comparable to the volume of assets of foreign companies represented in Russia. They are valued at a slightly smaller value, but very close.
To note: 9 of the 10 largest foreign companies in Russia at the end of 2022 are companies from unfriendly countries.
The first position is occupied by the French Leroy Merlin with revenues of 529.7 billion rubles. In second place is the Japanese JT Group (432.6 billion rubles), and in third place is the American Philip Morris (399.9 billion rubles). The top 10 also includes American PepsiCo (303.7 billion rubles), French Elo (Auchan and Atak; 292.6 billion rubles), Dutch VEON (VimpelCom; 286.4 billion rubles), German Metro (223.6 billion rubles) , the American Mars (201.4 billion rubles), the Swiss Nestle (195 billion rubles).
„ The French Auchan, for example, is not leaving Russia, because the share of the Russian division in the revenue of the entire company is about 11 percent, “ says Ostapkovic from the Higher School of Economics. “IKEA left, but its Russian division had three percent of the total volume. “
So the management of Western companies, which did not want to leave Russia with the start of the sanctions war, also seem to be skeptical about the likelihood of a “mutual withdrawal”.
In turn, as Ostapkovic notes, there are now about fifteen hundred foreign companies that are “queuing up to get out’ from the Russian market, trying to get some compensation from the Ministry of Finance.
They can’t find them, but they like to talk
Any talks about the possibility of Russia taking away at least part of its investments frozen in banks of enemy countries are empty talk, agrees the specialist in international law Maria Yarmush. “Well, we have to discuss something in the European Commission, but Russian assets are an interesting topic, it’s about money, so it’s good to discuss them”, she says ironically.
The expert confirms that seizing not only the sovereign assets of Russia, but also the interest accrued on them is impossible from the point of view of EU legislation in the presence of any decision of the European Commission.
„We have tried to lobby for the withdrawal of at least the interest on the use of these huge funds. But banks cannot transfer this money, there are no such laws. Interest on the use of funds under bank agreements must be credited to the accounts of the owners of these funds. says Yarmush.
She draws attention to another important point: “This is absolutely not profitable for the banks, because the money can be used for growth, making a profit. The amounts are large and all banking structures process these incomes and still receive interest. Naturally, the banking lobby will try to keep these frozen funds under their control, while charging the bank interest that is stipulated in the agreements.
In turn, Kolganov of Moscow State University points to another difficulty that inevitably arises if they intend to seize frozen Russian assets: “Unfriendly countries cannot detect approximately half of Russian assets located abroad. I also had the opportunity to see the Central Bank’s official response to a parliamentary inquiry regarding these assets. It states that the Central Bank retains access to these assets. That is, even in a technical sense, everything is not so simple.
Thus, experts agree that the repeated discussions of EU leaders about the fate of frozen Russian money are unlikely to bring anything new. But if an illegal decision is made to seize them from Russia, a sharp response will inevitably follow. At the same time, it is not even possible to calculate all the consequences for the global financial system.
Earlier, in May this year, Belgian Prime Minister Alexandre De Croo said that his country had allocated the proceeds of frozen Russian assets – approximately 200 million euros – to military support for Ukraine. At the same time, experts clarify that in this case we can talk exclusively about tax revenues that Belgium received, that is, about the Belgian treasury’s own funds, and not about Russian money.
Translation: ES
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