Highway robbery: EU to use frozen Russian assets to buy arms for Ukraine

RT
Sun, 17 Mar 2024 21:26 UTC

© Odd Anderson / AFP

(L-R) French President Emmanuel Macron, German Chancellor Olaf Scholz and Polish Prime Minister Donald Tusk at a press conference at the Chancellery in Berlin on March 15, 2024.

The German chancellor has clarified that profits obtained from Moscow's funds held in the EU will be used to arm Kiev

German Chancellor Olaf Scholz has said that interest accrued from Russian assets frozen in the EU will be used to purchase weapons for Ukraine.

Soon after Russia launched its military operation against Ukraine in February 2022, Western countries froze approximately $300 billion of funds belonging to the Russian Central Bank. Of that sum, the Brussels-based clearinghouse Euroclear holds around €191 billion ($205 billion), which has accrued nearly €4.4 billion in interest over the past year.

Speaking at a joint press conference with French President Emmanuel Macron and Polish Prime Minister Donald Tusk in Berlin on Friday, Chancellor Scholz said: "We will use windfall profits from Russian assets frozen in Europe to financially support the purchase of weapons for Ukraine."

The German leader also announced plans to establish a "new capability coalition for long-range rocket artillery," with procurement to take place "on the overall world market."

The German chancellor did not provide specifics, and it remains unclear whether he was referring to an entirely new initiative, or to a "long-range" scheme announced by President Macron in February.

European Commission President Ursula von der Leyen last month suggested using the interest from frozen Russian assets to buy weapons for Ukraine. However, Politico, citing an anonymous EU official, reported on Thursday that Malta, Luxembourg and Hungary had "expressed reservations" about the plan earlier this week.

Moscow has repeatedly warned that any actions taken against its assets would amount to "theft." It has stressed that seizing the funds or any similar move would violate international law and undermine Western currencies, the global financial system, and the world economy.

Comment: Even the EU's own financial institutions are screaming that this move will destroy the EU's monetary credibility.

The West has frozen roughly $300 billion in holdings belonging to the Russian central bank since the start of the Ukraine conflict two years ago. Brussels-based Euroclear holds around €191 billion ($205 billion) of the assets, and the EU is reportedly fast-tracking the decision to send Kiev the first tranche of up to €3 billion from profits generated by frozen Russian assets as early as July.

Should the West proceed with expropriating the funds, the Russian central bank is likely to seize around €33 billion of Euroclear money held in the national securities depository in Moscow, the official said. Russia may also sue to seize Euroclear cash from depositories in Hong Kong and Dubai.

Brussels will have to "ensure that there is no breach of financial stability," an unnamed EU official told Reuters on Tuesday. "The moment the war ends and all settlements can be made, all the money that was provisionally retained will also be transferred to Ukraine. But we need a significant amount in Euroclear... because Euroclear will face a lot of claims."

Moscow has repeatedly warned that it will respond in kind if the West goes through with threats to confiscate Russian assets. The Finance Ministry said last month that Western states and companies themselves still have holdings in Russia that could be jeopardized if the frozen funds are tapped.

If Western banks begin suing Euroclear for the loss of their money invested in Russia, "that's the mechanism how Euroclear could be totally emptied," the EU official warned.

Euroclear Bank boasts of over €37 trillion in assets in custody globally, but if it runs out of liquidity amid a litany of lawsuits - the Belgian central bank may be forced to withdraw its license, causing a global financial crisis, the official warned.

A number of Western countries remain divided over expropriating Russia's frozen assets to aid Ukraine. While the US and UK support the direct seizure of the assets, some EU member states, including France and Germany, have recently warned that the move could negatively affect financial stability and erode trust in the euro's status as a reserve currency.