© Reuters. Cautious EU probing: frozen Russian assets to fund Ukraine
News from the Financial Associated Press, June 25 (edited by Ma Lan)The UK legislated this week to confiscate Russian assets and hold frozen assets until Russia pays compensation for Ukrainian losses. After the United Kingdom, the European Union also has new dynamics.
EU governments backed and were moving closer to consensus on an idea to use proceeds from frozen Russian assets to pay for losses in Ukraine, the European Commission said on Friday.
Since the Russia-Ukraine conflict, the 27 EU countries have frozen more than 200 billion euros of assets of the Russian central bank and nearly 30 billion euros of private property of Russian oligarchs.
European Commission President Ursula von der Leyen pointed out on Wednesday that the EU is expected to propose specific implementation rules before August.
Although this is further support from the EU to Ukraine, compared to the UK’s desire to completely confiscate Russian assets, this move is undoubtedly still much more conservative.
Donating Russian assets to Ukraine would be legally tricky and likely impossible, EU officials said, but the bloc may have a way to transfer interest earned on Russian assets to Ukraine. In addition, it has been suggested that the EU may also consider taxing the profits of custodians of Russian assets.
Although this step is relatively cautious, according to media reports, the European Central Bank is still worried about it. It warned the European Commission against demanding funds from custodians of Russian assets as this would undermine market confidence in the euro and harm financial stability.
Privately, U.S. officials say there are substantial concerns about the legality of expropriating assets in one country and transferring them to another. The U.S. Treasury Department is also hesitant about the matter, arguing that the seizure of the Russian sovereign fund could weaken the U.S. as a financial safe haven and further dampen global support for the U.S. dollar.
However, Europe and the United States still insist that Russia must pay for the reconstruction of Ukraine. The World Bank estimates that Ukraine will cost at least $411 billion to rebuild. The European Union estimates that by 2027, the Ukrainian government will face a funding gap of 110 billion euros.
The Russian side disagreed with this. The Russian government stated that the seizure of Russian state-owned and private assets by Western countries violated international law, and relevant countries should immediately unfreeze these assets without any conditions attached.
Recently, the Russian government took control of the Russian entities of Finnish and German power companies in response to the EU’s asset seizure policy. In addition, the Russian government has created a fund to cover the losses of Russian sanctioned entities by seizing foreign assets.