(Bloomberg) -- The Belgian-based clearinghouse that’s holding the bulk of frozen assets from Russia’s central bank said that it shouldn’t be held liable if the European Union decides to confiscate the assets to help Ukraine.
Valerie Urbain, the chief executive officer of Euroclear Ltd., told Bloomberg in an interview that any plan to seize the underlying assets should also transfer all the liabilities.
“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,” she said. “If there is a confiscation of assets, everything should move, liabilities included.”
Up to now, the EU has tapped the profits generated by the sanctioned Russian assets to provide aid to Ukraine. Under a Group of Seven plan, Kyiv’s allies approved a mechanism where the profits would be used to underpin a €50 billion ($52.6 billion) loan package for Ukraine.
But as concerns grow over whether the US aid to Ukraine will continue when Donald Trump is in the White House, the idea of tapping Russia’s assets themselves, €180 billion of which are held by Euroclear, is likely to resurface.
A new administration in the US “will put back again some discussion on the table,” Urbain said, although for the time she said she hasn’t seen a fresh push on the issue.
Urbain insisted that using the assets would generate risks to the euro’s role as a reserve currency, as well as the broader stability of Europe’s finances.
When the possibility of confiscating Russia’s holdings was raised in the early stages of the conflict, Urbain said that some clients, including from China, raised concerns about respect for the rules-based system.
“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,” she said. “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.”
Although freezing sovereign assets is permitted under certain conditions, full confiscation remains much more controversial given the principle of state immunity enshrined in international law. A discussion on how to address any liabilities associated with the assets would complicate further the debate.
So far, Euroclear hasn’t seen a major change affecting the volumes of transactions from different parts of the world, but Urbain noted that there are increasing trading and investment flows within the Asian market, with a more direct corridor emerging between Asia and the Middle East.
One consequence of seizing Russia’s holdings is that it could help spur the emergence of a non-European rival to compete with Euroclear.
“With the landscape as it is, it’s not a short-term threat,” she said. “But if there is a confiscation of assets, everything is up in the air.”
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