West discusses possibility of using frozen assets of Russian central bank - The Financial Times

G7 allies are looking for ways to use the confiscated funds of the Russian Federation. The discussion on this topic has gained popularity in recent weeks, amid the resistance that is still observed in the United States over political approval of new funding packages for Ukraine.

This was reported by. UNN with reference to the Financial Times.  

Context

The event will intensify the discussion of options for financial assistance to Ukraine, including the use of frozen assets of the Russian central bank. In this context, the following options are being considered of using the assets of the Russian central bank, which are currently frozen in the European financial system.

According to the FT, in recent weeks, G7 officials have stepped up talks to unlock part of the frozen Russian state assets worth about $300 billion. US dollars. However, legal experts warn that such a move could provoke a sharp departure from the usual practice, which in turn carries legal and economic risks, causing significant controversy among the allies. The governments of G7 countries fear that a radical step will lead to the fact that foreign investors in dollar and euro assets will flee.

Location of frozen assets.

In Europe, the bulk of the of the assets - about 191 billion euros - are kept in Euroclear, a central securities depository headquartered in Belgium. The second largest amount, at approximately The second largest amount, approximately €19 billion, is frozen in France. The other The other holdings are much smaller, with Germany holding approximately 210 million euros, according to the FT.

US position

Washington has never publicly supported the seizure, but in recent weeks, the US has stepped up its efforts, arguing in G7 committees that there is a way to seize assets "in accordance with international law."

The G7 members and other particularly affected states may seize Russian state assets as a "countermeasure" against Russia's war in Ukraine "to persuade Russia to stop its aggression

Representatives of the United States representatives suggested that confiscated assets could be allocated to Ukraine in tranches, for example, through the World Bank or the European Bank for Reconstruction and Development. This is presented as an "advance" on the compensation to Ukraine that Russia will eventually have to to pay under international law for its aggression.

Legal obstacles

The idea of confiscating of Russian sovereign assets is legally untenable. The assets of the central bank assets are protected by customary international law; actions that seem to question this principle this principle would have serious consequences for the financial system.

Ingrid Brunk Professor of International Law at Vanderbilt Law School, argues that countermeasures should be a method that will push the wrongful state to fulfill its obligations.

Many countries have been harmed by many things that violate international law, without suggesting that we withdraw foreign exchange reserves. These are the most sacred types of assets in the global financial system

Opponents of radical moves against Russian assets are concerned that such a precedent  would damage the rules-based international order and undermine the trust that countries place in rules-based international order and undermine the trust that countries show when they place reserves in other countries.

This is supposedly This would seem to suggest to countries like China or Saudi Arabia that sovereign assets held in euros or dollars may not always be safe

AddendumAddendum

Meanwhile, shareholders of the of the European Bank for Reconstruction and Development (EBRD) have approved an increase in capital by four billion euros, which will double its lending to Ukraine. THE EBRD is already the largest institutional lender to Ukraine's corporate sector, having lent around 3.7 billion euros since the start of the full-scale Russia's full-scale invasion in February last year.

But, as is pointed out, loans from the EBRD, whose shareholders are the EU, the UK and the US, will not fill the Britain and the United States, will not fill the hole that will be created in the Ukrainian budget, if payments from the US and EU do not materialize.

Recall

The G7 discusses the use of frozen Russian assets to support Ukraine as traditional aid channels face problems in the US and Europe.

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