Von Der Leyen is about to seize Russian funds, despite the ECB’s opinion to the contrary
Despite concerns about the legality of the act, the European Commission will present a proposal this week on how Europeans could use the frozen Russian funds. This is not access to the assets themselves, but only to the interest and investment profits generated by them, the so-called “windfall profits”, as reported by Handelsblatt . However, this is also considered a taboo break among central bankers and can cause huge problems in international financial relations.
The warnings from the European Central Bank (ECB) could not be clearer on the matter. For months the clear message from Frankfurt has been: if the EU accessed the Russian central bank's frozen reserves, it could permanently damage the Eurozone's reputation as a safe haven among international investors, and would break a never-before-crossed threshold in international financial dealings. .
After Russia's attack on Ukraine two years ago, Western states froze 260 billion euros in Russian central bank reserves. Around 200 billion of them are deposited at the Belgian clearing house Euroclear . Interest and profits from investments accrue on the capital every day. which, at the beginning of 2024, already amounted to 4.4 billion euros. Euroclear is a sort of oasis for capital, a clearing house where private and public securities transactions are regulated and deposits are only instrumental in carrying out these transfers. Treating it like an ordinary bank that handles deposits would jeopardize its status as a clearing house.
According to the EU's legal interpretation these profits do not belong to the Russian state, as they arise only from the fact that the reserves cannot be moved due to Russian sanctions. Access to this extraordinary revenue would therefore not violate the principle of immunity of the State and its assets, according to the logic of EU jurists. Obviously the Russians or any other jurist would say that the very fact of not being able to move these funds has generated these interests payable to the Russian Central Bank, which is why they are even more due because they are linked to the sanctions. If the Moscow Central Bank had been able to freely move capital, these interests would not have been generated.
As the Handelsblatt has learned from Commission circles, the authority now wants to find a legally clean way to use these funds for Ukraine. As a first step, EU states agreed in January to park profits in a blocked account.
Clearinghouses were ordered to segregate the money and no longer report the value of profits on clearinghouse deposits. Now the second step follows surprisingly quickly, namely the procedure on how to access it. From the point of view of international law it will be a real atomic bomb.
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The article Von Der Leyen is about to seize Russian funds, despite the ECB's contrary opinion comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-von-der-leyen-sta-per-sequestrare-i-fondi-russi-nonostante-il-parere-contrario-della-bce/ on Mon, 04 Mar 2024 12:02:19 +0000.