EU may allow Euroclear to use russian assets

The European Commission (EC) is considering allowing the Euroclear depository to use frozen russian assets to protect the Group of Seven (G7) loan to Ukraine from possible retaliation by Moscow.

The initiative is seen as a last resort measure to compensate for possible losses of Euroclear, which holds russian assets frozen as a result of sanctions imposed over Moscow's war against Ukraine.

Supporters of this measure claim that it will "strengthen" the previously approved multilateral scheme, which provides for the use of proceeds from frozen russian assets worth about 200 billion euros to repay a 45 billion euro loan to Ukraine.

The Belgian depository is involved in litigation over sanctions against russia.

In 2023, various parties challenged the effects of sanctions, while “a significant number of lawsuits, almost exclusively in russian courts,” continued, Euroclear reported in its 2023 financial report. The financial group noted that it continues to separate income related to sanctions against russia from its core financial results and plans to retain this income "until further guidance is provided on the allocation or management of such income."

Although russian courts do not have sufficient powers to force the transfer of assets held in Belgium to the plaintiffs, they have the right to take appropriate steps with respect to Euroclear funds that remain in financial institutions in russia, Politico writes. In fact, as the publication notes, this applies specifically to subsidiaries of Western financial institutions operating in the russian market, where Euroclear funds may be located. After all, in case of sanctions imposed on them by the russian authorities, they, in turn, will demand compensation from Euroclear, the publication notes.

Euroclear reserves about 10 percent of its income from frozen assets.

Euroclear reserves about 10 percent of the proceeds from frozen russian assets to cover the costs of legal action. However, officials say it would be more “cost-effective” to use some of the russian assets directly to cover these liabilities - even if critics of the move question its legality under international law.

Western financial institutions, including the European Central Bank (ECB), have previously warned that the confiscation of russian assets could undermine confidence in the Eurozone as a financial center and in the euro as an international reserve currency, the newspaper recalls.

Source: Politico