The EU may allow Euroclear to use frozen assets of the Russian Federation: what is known

The European Commission is considering allowing the Belgian company Euroclear to use frozen Russian assets to protect the G7 loan of 45 billion euros to Ukraine from possible retaliation by Moscow. This is reported by Politicoand UNN. 

Details

According to three officials familiar with the matter, the move is seen as a last resort to compensate Euroclear, which holds the assets, for the losses Russia has suffered in complying with Western sanctions.

Supporters of the measure argue that it will strengthen the multilateral scheme, finally approved last week, that directs the surplus profits generated by some €200 billion in frozen Russian assets to repay a long-agreed-upon G7 loan to Ukraine.

Euroclear is currently involved in litigation with several sanctioned parties who are using the highly politicized Russian courts to challenge the seizure of their assets and seek compensation.

While Russian courts do not have sufficient powers to compel the transfer of Belgian assets  to the plaintiffs, they do have the authority to take action against Euroclear's balance sheets held in Russian financial institutions.  These assets belong mainly to Western financial institutions and companies, which in this case will be able to make their own compensation claims against Euroclear.

In a recent statement, Euroclear indicated that it is facing “a significant number of litigations, which are almost exclusively in Russian courts”.

To cover the costs or claims arising from these proceedings, Euroclear reserves about 10 percent of the profits earned from frozen assets in a special rainy day fund.

But officials argue that it may be more cost-effective to directly use some of Russia's underlying assets to cover these liabilities-even if critics say this jeopardizes compliance with international law.

Western institutions, including the European Central Bank (ECB), have previously warned that transferring ownership of Russian assets directly risks undermining confidence in the eurozone as a financial center and in the euro as an international reserve currency.

Recall 

In October  , the European Council stated that Russian assets would remain frozen until the aggression against Ukraine ends. Italy is working on a loan to Ukraine secured by the interest from the frozen assets of the Russian Federation.