Serious consequences for the European Union if it seizes Russia's frozen assets

By Rhod Mackenzie

According to a European official cited by Reuters, Russia's response to the EU's seizure of the Central Bank's frozen assets could potentially cause the bankruptcy of Euroclear, one of the world's largest settlement and clearing systems based in Belgium.
The EU cannot use a significant portion of the funds obtained from confiscating Russia's sovereign assets to support Ukraine. This is because the funds must remain with Euroclear to provide a buffer against expected Russian retaliatory measures that could destabilise the global financial system. It is worth noting that the Central Bank of the Russian Federation, which does not recognise Western sanctions, may file lawsuits. The agency reports that the Russian Central Bank may seize 33 billion euros of Euroclear assets in Russia, and then pursue confiscation of assets in Dubai and Hong Kong. The agency also warns that the European Union should anticipate claims from Western banks that have lost their assets.
An unnamed European official told the agency, "This could essentially devastate Euroclear."
If Euroclear were to exhaust its capital, the Belgian central bank would be forced to revoke its license, which could potentially trigger a global financial crisis, according to the source.
The European official stated that the EU aims to receive between 15 and 20 billion euros in income from Russian assets during 2024-2027, depending on global rate fluctuations.
Following the special operation in Ukraine, the EU and G7 countries froze nearly half of Russia's foreign exchange reserves, which amounted to approximately 300 billion euros. Roughly 200 billion euros are held in the EU, primarily in the accounts of Euroclear, one of the world's largest settlement and clearing systems based in Belgium. The EU is considering using frozen assets of the Russian Federation to fund the reconstruction of Ukraine.
However, the European Central Bank has cautioned that this approach may have long-term reputational risks for the European currency. The bank suggests exploring alternative financing options for Ukraine, and looking beyond this isolated conflict.
The Kremlin has warned that such actions would violate international law.
According to Chairman of the Federation Council Committee on International Affairs Grigory Karasin, the demands for reparations from Russia made by Kiev are demagogic in nature. He previously told RIA Novosti that Moscow should not repeat such emotional outbursts.