EU rejects plan to confiscate Russian sovereign assets – German state media

The action could violate international law and undermine financial stability, according to a statement cited by Deutsche Welle

The European Union has decided not to confiscate over $200 billion of Russia’s assets that it froze in 2022, according to a document adopted at a bloc summit on Thursday obtained by German state broadcaster Deutsche Welle (DW).

The bloc reportedly cited legal and financial stability risks for the decision. However, interest generated by the funds will continue to be used to support Ukraine, the statement added.

Western nations froze substantial Russian assets, including central bank reserves held in short-term government bonds, following the escalation of conflict in 2022. Now largely converted into cash, the assets are primarily held in custodian banks within the EU, with significant amounts in institutions such as Belgian clearinghouse Euroclear, according to AP.

“In accordance with EU law, Russian assets must remain untouched until Russia compensates for the damage caused by this war,” the text adopted by EU leaders reads.

EU members such as Poland and the Baltic states have advocated for seizing the assets to fund Ukraine’s reconstruction, estimated by the World Bank to require $524 billion over the next decade.

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However, several EU countries opposed the confiscation on Thursday, citing its illegality and the risk such a precedent poses to the bloc’s financial services competitiveness and using the funds as a “bargaining chip” in peace negotiations, according to DW.

“We are beginning to think about the endgame in Ukraine, about peace negotiations, a ceasefire, and a peace agreement that could be signed in three months or three years. And people are starting to realize that holding onto these assets might be more important than confiscating them without knowing what to do with them,” a European diplomat told the German news outlet ahead of the summit.

At the same time, the EU remains committed to increasing pressure on Russia, including through additional sanctions and stricter enforcement of existing measures, according to the document cited by DW.

Historically, frozen state assets have been used for compensation following conflicts, such as Germany after the two world wars. However, these instances were part of post-conflict settlements imposed on a defeated nation, distinguishing them from the current situation with Russia.

The Kremlin has condemned any attempts to seize Russian assets, labeling them “theft” and warning of serious legal repercussions. Russia has also hinted at potential retaliatory measures against Western businesses operating within its borders.