The US government is feverishly looking with allies for a way to no longer freeze Russian assets, but also to use them. This amounts to 270 billion euros – a fabulous amount, much of which is parked in our country. But it’s not easy.
Bruno Struys22 december 2023, 18:34
What money is it about?
There are roughly two types of assets from Russia that are frozen in the West. There is the money of Russian private individuals and companies, and there are the currency reserves of the Russian central bank. The latter category in particular is an interesting target for the West.
Depending on the source, the G7 countries, the European Union and Australia, have frozen at least 270 billion euros in assets of the central bank in Moscow. The largest part, approximately 200 billion euros, is located in the EU and the bulk of it is stored at Euroclear, headquartered in Belgium. A smaller amount of Russian state assets are frozen in the United States, approximately 34 billion euros.
For more than a year, Ukraine has been pushing not only to freeze that money, but also to use it, for example for reconstruction, which according to estimates would already cost 385 billion euros. But there are also calls for the money to be used to finance the war.
What are the American plans with that money?
Until recently, US Treasury Secretary Janet Yellen said seizing the funds was “not lawful in the United States.” Now the Biden administration is investigating whether this is possible under certain conditions, and which rules need to change.
According to The New York Times, talks between finance ministers, central bankers, diplomats and lawyers have accelerated in recent weeks. Biden would pressure the G7 to come up with a strategy by February 24, two years after the start of the war.
The discussion becomes urgent after Congress failed to agree on $60 billion in new military and humanitarian aid for Ukraine by the end of the year. Several Republicans questioned the many billions spent on this war.
Yet professor of international politics Bart Kerremans (KU Leuven) thinks that there is no problem with waning enthusiasm. “The 60 billion in itself is not the problem. The reason for the blockade is that Republicans understood that Biden wanted to release that money so badly that it was an opportunity for them to demand more resources for border security.”
What does Europe want and what is Belgium doing?
There is also a willingness in Europe to switch from freezing to using those credits. Two weeks ago, the European Commission came up with a plan to use the interest for reconstruction. A first. According to news site Politico, the Commission is targeting the proceeds from 180 billion euros in frozen assets at Euroclear in Belgium.
Our country benefits from the profits that Euroclear makes on Russian assets, because it generates corporate tax. Belgium uses this to finance all kinds of costs related to Ukraine: from defense expenditure to allowances for public social welfare centers. This is what the office of Minister of Finance Van Peteghem (CD&V) says.
How realistic is it?
It has never happened in Europe, but it has in the United States. After the invasion of Iraq, then American President George W. Bush used frozen Iraqi assets for reconstruction and compensation for victims. But the law only allows it in the event of ‘armed hostilities’ with a country and, strictly speaking, the United States is not a party to the war in Ukraine.
“A new legal framework is needed,” says economist Ivan Van de Cloot of the Merito foundation. He calls the plans to use those credits ‘hot air’ and ‘cheap talk’.
“From day one it has been part of the war rhetoric, which presented it as if we would fully recoup the Western sacrifices from the Russians. Even releasing the interest on those assets is a legal minefield.”
What are the risks?
Currently, it is possible to touch assets if a court orders a forfeiture order. This is possible, for example, if the money was used for money laundering or illegal arms trafficking, but it is unclear how this would apply to Russian state assets. “Every step you take must be linked to legal procedures,” says legal scholar Michel Maus (VUB).
For example, the German public prosecutor’s office announced a few days ago that it wanted to seize 720 million euros in frozen Russian assets. This concerns money that was placed in a bank account in Frankfurt by a Russian financial institution, probably to violate an embargo. If the prosecutor’s request is successful, the blocked Russian money could end up in the German treasury.
Apart from the practical objections, there are also financial and economic concerns. The European Central Bank (ECB) already expressed its concerns about damage to the euro’s reputation as a stable currency. High-ranking officials in the US also fear that countries may now hesitate to leave their funds with the American Central Bank (Fed).
“You are gnawing at property rights and the fundamental foundations of our financial-economic system,” says Van de Cloot. “The reason why it still hasn’t happened is because people fear opening a Pandora’s box that could explode in their own face.”
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2023-12-22 17:34:28
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