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Economic conditions

Ukraine Needs a Financial Lifeline: Seizing Russia's Frozen Assets

Strategic Insights

— 1 min read

Ukraine's struggle to counter the Russian invasion has been hindered by a lack of financial resources. With billions of euros in frozen Russian assets, experts argue that the country should be granted access to this money to bolster its defense efforts. The European Union Commission and the Belgian government have the power to confiscate these funds, which are stored in the Euroclear trading system, and use them as collateral for a loan or transfer them directly to Ukraine.

Key Takeaways:

  • The estimated €300bn in frozen Russian assets stored in Euroclear and other EU-based financial custodians could be seized and used to support Ukraine's war efforts.
  • The money, mostly central bank funds, was left behind after Putin's order to invade Ukraine, rendering Russia's claim to it void.
  • Confiscating the funds would send a strong signal to Putin, undermining his support at home and boosting Ukraine's morale.
  • The EU Commission and Belgian government have the authority to confiscate the funds, which could be used as collateral for a massive loan or transferred directly to Ukraine.
  • This move would also help to topple the US dollar as the premier reserve currency, with the euro taking its place.
  • The EU has objections, such as concerns about the impact on European financial stability and potential investor pullout, but experts argue that these concerns are overstated.
  • Even Rishi Sunak, writing in the Economist earlier this year, agrees that Russia has forfeited its claim to the funds.
  • Belgium and the EU have shown some flexibility, allowing interest on frozen assets to be used for Ukraine and providing dividends to the war effort.

Statistics:

  • €300bn: Estimated value of frozen Russian assets stored in Euroclear and other EU-based financial custodians.
  • €183bn: Value of Russian funds lodged in Euroclear systems.
  • €3bn: Amount Planned to be seized and redistributed by Euroclear after the Moscow move.
  • €300bn: Amount proposed to be used as collateral for a massive loan to Ukraine.
  • €3bn: Amount planned to be used for Ukraine after the Moscow move.
  • €300bn: Value of potential loan that could be granted to Ukraine using the seized funds.

Sources:

  • Byline: Phillip Inman, [The Guardian](https://www.theguardian.com/commentisfree/2022/oct/25/warning-of-economic-war-between-us-and-eu).
  • Yannis Stournaras, Governor of the Bank of Greece.

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