European Commission President Ursula von der Leyen said today, June 21, in a speech at the Ukraine Recovery Conference in London that the EU will present, before the summer break in mid-July, a proposal to use part of Russia’s frozen assets for the reconstruction of Ukraine.
More than half of the assets are in cash and deposits, while a “substantial amount” of the remainder is in bonds that will turn to cash when they mature in the next two to three years.
EU officials considered actively managing the assets to generate returns that could be used to support Ukraine. But property rights need to be considered, and there is a risk of negative returns that cannot be completely eliminated.
Overall, the EU considers taking the international lead on the matter, as most of Russia’s central bank assets are in the EU. EU leaders are expected to take stock of the work done so far next week and urge officials to continue making progress on it, according to a draft statement seen by Bloomberg.
An EU working group has assessed that there is no credible legal avenue that would allow the confiscation of frozen or fixed assets based solely on the fact that these assets are under EU restrictive measures.
Another option considered would be to oblige companies with Russian holdings that are generating large profits to transfer a substantial amount of those profits to the EU with the aim of funneling them to Ukraine. This could reduce the legal risk because the EU would not manage them.
EU officials wrote that this model would not affect financial stability, would preserve the business models of the companies involved, and would be fair in terms of taxes. “This would not affect the legal status of the assets,” they added.
Several international financial institutions are concerned that the appropriation of Russian assets could lead Moscow to retaliate against its remaining interests in Russia.
The European Central Bank has also warned that using interest rate yields on frozen Russian assets could encourage holders of official reserves to turn their backs on the euro. The central bank believes that international coordination will play a key role in mitigating risks.