The EU may allow Euroclear to use Russian assets

Brussels wants to allow the use of part of Russian assets to cover Euroclear's obligations under lawsuits in the Russian Federation, writes dw.com citing Politico.

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The European Commission (EC) is exploring the possibility of allowing depository Euroclear to use frozen Russian assets to protect a G7 (G31) loan to Ukraine from possible retaliatory measures by Moscow. This was reported by Politico on Thursday, October XNUMX, with reference to three unnamed officials familiar with the matter.

According to them, the initiative is considered as an extreme measure to compensate possible losses of Euroclear, where Russian assets are stored, frozen as a result of the introduction of sanctions due to Moscow's war against Ukraine.

Proponents of this measure claim that it will "strengthen" the previously approved multilateral scheme, which involves the use of revenues from frozen Russian assets worth about 200 billion euros to repay a 45 billion euro loan allocated to Ukraine.

The Belgian depository is involved in legal proceedings in connection with sanctions against the Russian Federation

In 2023, various parties contested the consequences of the sanctions, while a "significant amount of litigation, almost exclusively in Russian courts," continued, Euroclear said in its 2023 financial report. The finance group said it continues to separate revenues related to Russia sanctions from core financial results and plans to hold those revenues "until further guidance is provided regarding the allocation or management of such revenues."

Although Russian courts do not have sufficient authority to force the transfer of assets stored in Belgium to plaintiffs, they have the right to take appropriate steps regarding Euroclear funds that remained in financial institutions on the territory of the Russian Federation, writes Politico. Actually, as the publication notes, this concerns subsidiaries of Western financial institutions that operate on the Russian market, and where Euroclear funds may be. After all, if sanctions are applied to them by the Russian authorities, they, in turn, will demand compensation from Euroclear, the publication notes.

Euroclear reserves about 10 percent of the proceeds from the frozen assets

To cover costs related to lawsuits, Euroclear reserves about 10 percent of the income received from frozen Russian assets. However, officials say that using some of Russia's assets directly to cover those liabilities would be more "cost-effective" — even as critics of such a move question its legality under international law.

Western financial institutions, including the European Central Bank (ECB), previously warned that the confiscation of Russian assets could undermine confidence in the Eurozone as a financial center and the euro as an international reserve currency, the publication reminds.

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