FLASH
Shkruar nga Walter Galbiati
It is no coincidence that the Russian ambassador to Italy, Alexei Paramonov, said that if this operation were carried out, it would be the "theft of the century."
Using Russian assets, pretending not to have used them. This is the plan that the European Commission, or at least some of the 27 EU countries, have in mind to finance Ukraine without violating international law and property rights.
The topic, discussed last week by G7 finance ministers, will be discussed at the meeting table of European leaders in Brussels. The aim is to provide Zelensky with a loan of 140 billion euros, using frozen Russian assets as collateral.
After the invasion of Ukraine, Europe froze approximately €300 billion in assets of the Russian Federation, €210 billion of which are held in the Belgian bank Euroclear, whose main job is to safeguard securities and settle payments for financial transactions conducted in the markets.
Availability. These are mostly government bonds, in a dozen currencies, some of which have matured and are now held as liquid assets worth nearly 180 billion euros. Russia, due to sanctions, cannot use or move this money.
From 2022 to 2024, since coupons are also collected on bonds, additional income has accumulated that has always remained sequestered in the Belgian bank and unused. But since July of last year, something has changed. Following the agreement reached at the G7 summit in Puglia, that dividend flow has not been stopped, but has been channeled to repay loans called the Extraordinary Revenue Acceleration (ERA).
The first of these loans was granted to Ukraine precisely on the occasion of the G7 meeting held in June 2024 in Borgo Egnazia. It is a $50 billion loan, with $20 billion each provided by the US and Europe and another $3 billion by the UK, Japan and Canada. Part of the interest that Euroclear collects on Russian assets will now repay this exposure.
The European Union, however, wants to increase the risks, since a possible end to the conflict is still on the horizon, and the demands for funds show no signs of abating. The costs of supporting Ukraine are starting to weigh heavily, also because Donald Trump, unlike his predecessor Joe Biden, is no longer so willing to open his wallet. Therefore, the idea of borrowing 140 billion euros, backed by liquidity held in Euroclear, remains the best.
How it works. Euroclear transfers Russian money to the EU with zero interest and no expiration date. Europe lends Ukraine the same terms and takes the Russian money as collateral. The debt will then be repaid by Ukraine once the conflict is over, but only when it receives war reparations from Russia.
A win-win for both sides. The result would be beneficial for the European Union, which would not have to consider the money as a non-repayable grant, and for Ukraine, which would immediately raise the funds to finance its own expenses. Moreover, according to the Commission, this would not violate property rights because ownership of these securities would always remain with the Russian Federation.
In reality, the operation presents five major problems.
1) Will Russia ever pay? The first, and perhaps most obvious, is that the plan assumes that Ukraine will win the war and force Russia to pay damages. Without being great military strategists, this option currently seems quite remote. Therefore, Europe should offer a guarantee with the same amount distributed to compensate Euroclear in case Russia fails to provide a single euro.
This guarantee should be paid proportionally by the participating countries and last at least until 2028, when the loan could be included in the new EU budget.
To ease the impact on the finances of member states, which are facing rising debts, efforts are being made to expand membership to include G7 countries, including the United States, and to distribute the loan in installments, thus spreading the guarantees over time and allowing for the future EU budget.
2) Temporary seizure. The second problem is related to the duration of the seizure of Russian assets. Since the €140 billion loan is to be granted indefinitely, pending payment by Russia, the duration of the seizure of Russian assets, which is currently renewed every six months, must be matched. Therefore, the seizure must be made for an indefinite period, an action that, however, must be approved by all 27 members of the European Union. This transition is not guaranteed, because here another problem arises.
3) The political problem. Not all EU countries are guaranteed to agree. It seems unlikely that Hungary and Slovakia, with governments considered close to Russia, would approve it, or that others like Italy would be in favor of increasing tensions against...
-Without unanimity
The solution could be to proceed without unanimity, as suggested by Germany, which favors going all the way, but by qualified majority. This change, according to the treaties, can happen whenever the European Council has already expressed its approval on the same issue. After all, many are beginning to agree with Polish Foreign Minister Radoslaw Sikorski, who spoke about financing Ukraine last week: "It's very simple: either we use the aggressor's money or we will have to use our own. Don't ask me which of the two options I prefer."
4) Is the law the same for everyone? Then there is the legal problem of violating property rights and international laws protecting deposits. Seizing assets held in Europe without a solid legal basis could be misinterpreted by financial markets, which attach great importance to the regulatory stability of the contexts in which they operate.
-Theft of the century.
It is no coincidence that the Russian ambassador to Italy, Alexei Paramonov, said that if this operation were carried out, it would be the "theft of the century". However, according to European Commission lawyers, the proposed mechanism would not be an expropriation of Russian liquidity deposited with Euroclear, because it clearly excludes the modification of Russia's legal claims. However, sources close to the European Central Bank, perhaps also because these securities are held by the Russian Central Bank, are not so sure about the legal shield surrounding the operation.
-Risk of lawsuits.
In other words, if an agreement on future reparations is not reached, Russia could demand that money from Euroclear, which obviously wants to protect itself in order to fulfill the European plan.
5) How much more money? The last issue concerns the size of the loan, because 140 billion euros is a lot, but not too much. In September, Kiev estimated the need for 50 billion euros in foreign aid for 2026, while the Kiel Institute, one of the leading European and global think tanks on international economics, estimates 80 billion euros per year.
This figure has already been given. This means that the 140 billion euros, which is close to the more than 170 billion euros that Europe has offered so far in military and humanitarian aid, may not be enough if the war drags on much longer.
Now the issue of using Russian goods is back on the table. Of course, if European leaders at the summit on October 23-24 decide to move forward, overcoming all the problems, and start using them, even if only as collateral, it would be an important step in opposing Russia. A strong signal against Putin, along with the ban on Russian gas, which paradoxically is still bought in Europe and a source of income to support the war./ Adapted by “Pamphlet” from “La Republicca”
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