Brussels, Berlin the European Union reaches for Russia’s central bank reserves: EU commission chief Ursula von der Leyen advocated on Wednesday that since the beginning of the war of aggression against the Ukraine to use frozen Russian assets to rebuild Ukraine.
“Russia must also pay for the devastation it has caused,” von der Leyen demanded. In total, the EU blocked Russian central bank reserves worth 300 billion euros. The frozen assets of Russian oligarchs add up to a further 19 billion euros.
As a first step, the EU could invest the Russian money together with its international partners and transfer the profits made to Ukraine. “And once the sanctions are lifted, those funds should be deployed in a way that Russia compensated in full for the damage suffered by Ukraine,” von der Leyen said.
The statements made by the head of the commission are not to be understood as an announcement, but as a statement of position. The Member States of the European Union are responsible for implementing the measures.
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The financial needs of Ukraine are enormous. The war damage is already estimated at 600 billion euros. Important parts of the Ukrainian infrastructure have been destroyed and the economy has collapsed.
The government in Kyiv therefore lacks tax revenue to pay soldiers and keep the state running. In the coming year, according to calculations by the International Monetary Fund (IMF), Ukraine will need at least three billion euros per month.
The EU wants to pay half of the sum. Proceeds from investing the frozen Russian assets could fill some of the remaining financial gap. At least this is what von der Leyen calculates: take the Russian, give to the Ukraine.
High legal hurdles
However, the legal hurdles for such an initiative are enormous. The Commission also concedes this in an internal option paper that is available to the Handelsblatt.
In it, the legal experts of the Brussels authority write: Central bank assets “are generally considered to be covered by state immunity”. As justification, the paper refers to international customary law and a United Nations convention.
Even sooner it is possible to collect money from Russian oligarchs. However, it must therefore be possible to establish “a connection to criminal activities”. The Europeans would therefore have to present court-proof evidence, a simple reference to the fact that a certain person was close to the Kremlin chief Wladimir Putin moved will not be enough.
The G7 have set up a task force to coordinate internationally on how to use Russia’s assets for Ukraine. US President Joe Biden had already proposed a law in May that would make it easier to confiscate villas, yachts and accounts belonging to Russian oligarchs.
Baltic countries are demanding that Russian assets be used for reparations
Even then, top officials in the US Treasury Department pointed out that access to central bank assets is extremely sensitive from a legal point of view. Americans fear expropriation plans will cause states to shun the dollar as a reserve currency. In the federal government, too, there are serious doubts that the money from the Russian central bank can be confiscated.
In contrast, the Baltic countries have been demanding for months that frozen Russian assets be used to pay reparations. Von der Leyen has now joined them. “Russia’s atrocious crimes will not go unpunished,” she said.