Seizing Russian Assets in the EU: A Solution or a Controversy?
In March 2022, a significant development took place when the super-yacht Amore Vero, owned by Rosneft CEO Igor Sechin, was seized in southern France. Despite this, the European Union (EU) currently has no plans to touch the frozen accounts of sanctioned oligarchs, signaling a level of safety for their wealth. A substantial delay by European states in realizing the large frozen Russian central bank reserves has prompted questions and criticisms from various quarters.
Ukrainian anti-corruption activist Olena Halushka is among those raising concerns. She questions why European taxpayers should finance their own defense against Russian aggression when significant Russian assets are frozen within the EU. According to World Bank estimates, the Russian war against Ukraine has already caused at least $411 billion in damages, a financial burden that Ukraine is struggling to bear. Halushka, an economist, believes the "terrorists" should be made to pay for the devastation they have caused. Her proposal is to seize the Russian state assets and those of Kremlin-loyal oligarchs frozen in the EU, and use them for Ukraine's benefit.
The EU's Stance on the Matter
However, the realization of this proposal is not straightforward. The governments of EU member states are not in a rush to hold Russia financially accountable. This hesitation is evident despite the EU gaining an interest of €2.28 billion ($2.68 billion) in the first half of the year from the frozen assets. The primary concern for the EU is the need to adhere to international law and maintain the stability of the Euro as a major global reserve currency. Some members and the European Central Bank have expressed concerns that even a carefully targeted plan could shake confidence in the Euro. This hesitance has led to a delay in using the frozen Russian assets to aid Ukraine.
A Staggered Approach to Seizing Russian Assets
The European Commission, facing opposition from countries including Germany and France, has proposed a staggered approach to levy profits from Russian state assets frozen inside the bloc. Initially, the plan requires the bloc's financial institutions to keep the profits separate in their balance sheets, a measure already voluntarily implemented by Euroclear, the Belgian settlement house holding most of the frozen assets. Eventually, the proposal suggests taxing these revenues and transferring them to the EU budget to fund Ukraine's reconstruction. But this approach would require unanimous backing by EU countries, as it falls under common security and foreign policy.
Legal Challenges and Future Perspectives
Legal scholars have argued that seizing Russian assets would be illegal under international law, undermining the rules-based order. Others have described the idea as seductive but also unnecessary and unwise, pointing out that the Bank of Russia's reserves are public money and cannot be generally assumed to have been illicitly acquired. Despite these challenges, there is a strong political push to make progress on the issue, prompted by the significant damage caused by the Russian invasion and the need for funds for Ukraine's reconstruction.
As the EU grapples with this complex issue, the focus remains on finding a solution that upholds international law, maintains financial stability, and supports Ukraine in its time of need. Whether or not the EU will ultimately seize the frozen Russian assets to benefit Ukraine remains to be seen.