By Jan Strupczewski
BRUSSELS (Reuters) – Belgium has proposed to Group of Seven (G7) countries to use immobilised Russian central bank assets as collateral to raise debt for the reconstruction of Ukraine, but the idea does not have much European support, European officials said.
Belgium is not part of the G7, which comprises the United States, Japan, Canada, Britain, France, Germany and Italy, but has become part of the discussion on what to do with the Russian assets, frozen by the West after Moscow’s invasion of Ukraine, because the bulk of the money is held in Belgium.
According to the European Commission, there are more than 269 billion euros ($288.85 billion) of Russian assets immobilised in G7 countries, the EU and Australia, of which 200 billion euros are in the EU, mostly in Belgium.
The United States, unable to agree on new financial aid to Ukraine because of domestic political infighting, in December floated the idea of confiscating the immobilised Russian money and handing it over to Kyiv.
But European Union countries and institutions oppose that, arguing there is no legal basis for seizing sovereign assets of another country and doing so could make investors withdraw from the euro currency.
Russia has also warned that if the West seized its money, it would retaliate by confiscating Western assets still in Russia, which some estimate at around $288 billion.
This could trigger the collapse of Belgium’s Euroclear clearing house, which holds the Russian money, and the bailout of Euroclear could be very costly, officials have said.
Belgium’s Prime Minister Alexander de Croo told Reuters in January that one of the alternatives could be to use the immobilised assets as collateral for bonds through which the West could raise money for Ukraine.
But while the Belgian idea has reached G7 finance ministries as one of the options under discussion, European countries show little enthusiasm for it.
“What we know is that using the assets as collateral suffers from the same legal, economic and financial concerns as a confiscation and most legal departments across the G7 consider that,” one European official, close to the issue, said.
“Using an asset as a collateral means owning the asset, so, in this case, confiscating it,” the official, who asked not to be named, said. Four other European officials close to the issue agreed with this view.
Nor is it clear what entity would issue the bonds and what investors would think of a plan which would clearly entail a default when the bonds mature, with investors getting their money back thanks to the collateral.
($1 = 0.9313 euros)
(Reporting by Jan Strupczewski; Additional reporting by Giselda Vagnoni and Giuseppe Fonte in Rome; Editing by Susan Fenton)
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