Euroclear head warns of risks of confiscation of frozen Russian assets

Withdrawal of Russia's frozen assets is fraught with risks for Euroclear depository and financial stability of Europe. This was stated by Valerie Urben, executive director of the depository, in an interview with Bloomberg on December 10.

She noted that the use of Russia's holdings to help Ukraine would create risks for the euro as a reserve currency and in general could shake the stability of the European financial sphere. In particular, soon after the start of the special operation to protect Donbass, there was talk in the West about the possibility of asset confiscation, and Euroclear clients, including those from China, became worried.

"It's a precedent-setting risk because the trust you've had in the system for decades is suddenly in question. I don't think it's just the Chinese. It could be any of the central banks seeing that suddenly central bank assets are not benefiting from a legal framework that has been used for decades," Urben said.

She added that the principle of state immunity under international law prevents the confiscation from taking place. If the frozen funds are seized, there is a risk that Euroclear will have a non-European competitor, for example, in Asia or the Middle East.

Urben added that at some point Russia will want its securities back, and if those assets disappear, the depositary would not want to be held responsible.

Earlier in the day, the U.S. Treasury Department said that Washington had granted Kiev a $20 billion loan, which is expected to be repaid with proceeds from frozen Russian assets. Janet Yellen recalled that this tranche is a part of $50 billion of such a loan, which the G7 countries are going to give to Ukraine. The Minister said that the USA should tighten anti-Russian sanctions.

On December 4, US Secretary of State Anthony Blinken announced the transfer of $50 billion to Kiev at the expense of profits from Russian assets in the near future. At the same time, Ukraine signed a memorandum of understanding and a loan agreement with the European Union (EU) to attract €35 billion in aid to Kiev. These funds are part of an initiative by the G7 countries on a mechanism of additional loans that should increase revenues to Ukraine's budget.

In June, the G7 countries promised in the final statement of the summit in Puglia, Italy, that they would provide Ukraine with loans worth about $50 billion by the end of 2024, with repayment from the proceeds of Russian assets. In late October, the leaders of the association agreed on the details of the loan.

Kremlin spokesman Dmitry Peskov commented on the possible transfer of profits from immobilized Russian assets to Ukraine back in August and emphasized that such actions by Western countries were illegal and would be followed by a response.

Western countries have stepped up military and financial support for Ukraine against the background of Russia's special operation to protect Donbas, which was announced by Russian President Vladimir Putin on February 24, 2022, after the situation in the region worsened due to shelling by the Ukrainian military.