From: Atlantic Council BY CHARLES LICHFIELD — Charles Lichfield is the director of economic foresight and analysis and the C. Boyden Gray senior fellow at the Atlantic Council’s GeoEconomics Center.
BOTTOM LINES UP FRONT
- The European Council meets this week to vote on a proposed “reparations loan” that would use billions of dollars of immobilized Russian assets to support Ukraine.
- Belgium, which holds the majority of the assets, and several other EU member states have raised concerns about the proposal.
- These states’ concerns should not be dismissed outright, but the proposed plan does not amount to confiscation of the assets—and it should therefore move forward.
WASHINGTON—Will this be the week where Europe takes its boldest step yet on Russia’s immobilized assets?
The prize would be substantial. A financial commitment of €210 billion ($247 billion)—to be spread across regular spending, defense, and reconstruction—would be a lifeline to Ukraine. It could even enable Kyiv to resist pressure to accept a possible bad deal that would set it up for further Russian aggression. Take it from someone who’s argued againstconfiscating the assets: It’s a risk worth taking.
Shortly after Russia launched its invasion of Ukraine in February 2022, the Group of Seven (G7) and like-minded partners imposed sanctions on Russia that immobilized between $300 billion and $350 billion in Russian central bank assets held in their jurisdictions. Most turned up in the European Union (EU), where the sanction underpinning the immobilization has had to be renewed every six months. Slowly, the EU has explored ways to mobilize their value to boost its support to Ukraine, first by siphoning off interest income, then by channeling that interest income into repayments on the $50 billion of the G7’s Extraordinary Revenue Acceleration (ERA) loans that have largely spared Kyiv from cash flow issues this year. The EU has resisted calls to take the irreversible step of seizing the assets.
Now, as Ukraine looks likely to run out of money this coming spring, the European Commission is trying, with the support of key member states including France and Germany, to switch to a “reparations loan,” which mobilizes the principal now. If EU leaders agree to the plan this week, the scheme will not confiscate sovereign assets. Russia’s central bank and its National Welfare Fund will still be able to log into their proverbial online banking portals, and their claim on money stored in the EU will still be valid. And, importantly, they will still be unable to move the money.
Voice of Ukraine 