EU Seizure of Russia’s Assets Could Erode Euro’s Reserve Status

Seizing Russia’s frozen assets risks catastrophic fallout, including collapsing trust in global financial systems, destabilizing the euro, and sparking severe retaliatory measures.

Confiscating Russia’s Assets Could Backfire Catastrophically, Euroclear Cautions EU

Euroclear Ltd., the Belgian clearinghouse responsible for holding the bulk of Russia’s frozen central bank assets, has raised significant concerns about the risks and liabilities associated with confiscating these holdings to aid Ukraine. Speaking to Bloomberg, Valerie Urbain, Euroclear’s CEO, stressed the importance of addressing liabilities if the European Union opts for asset seizure. Urbain warned:

We cannot be in the situation whereby the assets have been seized, but, in a couple of years, Russia comes and knocks at the door and says, ‘I want to recoup my securities,’ while the securities assets would have been gone.

“If there is a confiscation of assets, everything should move, liabilities included,” she added.

The EU has so far used the profits generated from Russia’s frozen assets to fund aid for Ukraine, including a Group of Seven (G7) initiative that supports a €50 billion (approximately $52.49 billion) loan package for Kyiv. However, discussions around confiscating the €180 billion of Russian assets held by Euroclear have resurfaced amid concerns about future U.S. support for Ukraine, particularly under a potential Donald Trump administration. Urbain noted the possibility, stating that a new U.S. administration could revive discussions, though there has been no recent momentum on the issue.

Russia has sharply criticized Western nations, including the U.S. and European countries, for utilizing frozen Russian assets to support various initiatives, such as aiding Ukraine in its ongoing conflict and other geopolitical efforts. Moscow has labeled these moves as theft, emphasizing that such actions violate international norms and risk escalating tensions. European Union nations have also explored mechanisms to redirect profits from seized Russian assets to fund reconstruction efforts in Ukraine, further aggravating Russia. In response, the Kremlin has hinted at potential retaliatory measures, including nationalizing Western-owned assets within Russia. This issue reflects a deepening rift between Russia and Western powers, with frozen assets becoming a flashpoint in their broader political and economic confrontations.

The Euroclear CEO highlighted the broader ramifications of such actions, warning of potential disruptions to the euro’s status as a reserve currency and to Europe’s financial system. She cautioned:

It is the risk of creating a precedent, because the trust that you have had for decades in the system, suddenly it’s been questioned.

“I don’t think it’s only the Chinese. It can be any of the central banks who would see that, suddenly, central bank assets do not benefit from the legal framework that has been used for decades,” she explained.

While Euroclear has not observed significant changes in transaction volumes, Urbain noted increased activity in Asian and Middle Eastern markets. “With the landscape as it is, it’s not a short-term threat. But if there is a confiscation of assets, everything is up in the air,” she concluded.

Source