The EU cannot confiscate the frozen Russian funds in the amount of 200 billion euros

Bloomberg has identified significant legal hurdles for one of the two options the block is exploring: the temporary use of CBR liquid assets.

European Union Cannot Permanently Seize Russia’s Frozen Assets, Document Says EU, cited by Bloomberg. Brussels will focus on another way to use these assets for now, according to Bloomberg, while continuing to explore legal ways to use Russian Central Bank funds to rebuild Ukraine. To that end, at a meeting next week, Brussels will ask EU leaders to give them the green light.

Bloomberg has identified significant legal hurdles for one of the two options being explored by the block: the temporary use of the liquid assets of the Central Bank of Russia – in other words, investing the assets and funneling the proceeds to Ukraine.

Companies with Russian assets that make large profits by investing them may be required to transfer a significant amount to the EU. This could reduce the legal risk for the bloc, as the EU will not directly manage these resources. EU representatives noted that such a model would not affect financial stability, preserve the business models of the companies involved, and be fair in terms of taxation. “This will not affect the legal status of the assets,” they added.

At the same time, the ECB sent a signal to Brussels that plans to redirect payments on Russian bonds to finance Ukraine would be a bad signal for global markets, according to people familiar with the discussions.

The ECB warned that the use of interest income from frozen Russian assets could encourage other central banks that hold large cash reserves to “turn their backs” on the euro, according to an internal note. “The implications could be significant: it could lead to a diversification of reserves away from euro-denominated assets, increase the cost of funding for European sovereign banks and lead to trade diversification,” the ECB said in a note.

Based on Bloomberg, FT.

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