THE European Union is unlikely to confiscate Russian central bank assets frozen in Europe, despite G7 plans to discuss the legality of such a move at a meeting in February, senior EU officials said.
The EU, United States, Japan and Canada froze some US$300 billion of Russian central bank assets in 2022 when Russia invaded Ukraine.
Some US$200 billion of that is held in Europe, mainly in the Belgian clearing house Euroclear.
The discussion comes as US President Joe Biden faces Republican opposition to his request for another US$61 billion in aid to Ukraine.
The EU is also struggling to agree on a €50 billion aid package for Ukraine until 2027 because of opposition from Hungary, whose Prime Minister Viktor Orban has close ties with Moscow.
Confiscating the Russian assets and handing them over to Kyiv would ease the pressure on the West to finance Ukraine's war effort, but European officials dismiss it as too legally risky.
"Confiscation of the capital of the Russian assets is not going to happen.
"There is no agreement on this among EU member states," one senior official with insight into talks on the matter said.
In an interview with Reuters, Luxembourg Foreign Minster Xavier Bettel said he was "very cautious" about seizing the assets.
"Imagine if we decide politically to give billions to Ukraine. And in six months, we have a judicial decision saying we are not allowed to give it to them. Who will pay then?"
European officials are concerned not only about the legality of such an unprecedented confiscation of sovereign assets, but also with the potential consequences for the euro currency.
Investors might pull out of euro assets out of concern their money might one day be seized too.
In addition, Moscow has pledged it would retaliate by confiscating Western assets in Russia, which some reports put at US$288 billion.
Belgian Finance Minister Vincent van Peteghem, whose country holds the rotating presidency of the EU until July, is very reticent on the possibility of confiscating the Russian assets.
"We need to be very prudent with that proposition. I think that it's important that what can come on the table should be legally sound and we should avoid any impact on financial stability," he said on Tuesday.
Belgium's Euroclear has "substantial" amounts of assets in Russia, officials said, which could be seized by Moscow in what could pose a financial stability risk to the clearing house, with major repercussions.
"The EU cannot bail out Euroclear," another senior official said. "Euroclear manages trillions and its bankruptcy would be far more than the budget of the EU.
"We have to balance risk and profit."
Instead of confiscating the Russian assets, EU governments are likely to back a European Commission proposal from December to take over only the profits generated by the assets, leaving the principal untouched.
This could generate an estimated €15 billion to €17 billion over four years that could be transferred to Ukraine, officials said.
The writers are from Reuters
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times