The discussion follows ongoing debates over the best approach to make these frozen assets available to aid Ukraine amidst the ongoing conflict with Russia.
Key Points
- Event: G7 Finance Ministers' Meeting
- Location: Stresa, Italy
- Agenda: Using frozen Russian state assets as collateral for a €30 billion loan to Ukraine
The meeting aims to address a rare moment of disagreement between the US and Germany on how to handle the frozen assets. While some G7 members, notably the US and the UK, are pushing for a more aggressive approach, others, including Germany and the European Central Bank (ECB), have raised legal and economic objections.
Legal and Economic Objections
Christine Lagarde, President of the ECB, has voiced strong reservations about fully freezing and confiscating the assets, citing potential threats to the international legal order. Instead of seizing the assets outright, Washington proposes using the frozen assets to back a large loan to Ukraine, with interest paid from the annual profits of these assets.
Potential Solutions
- Proposal: Provide Ukraine with a €30 billion loan or bonds, with interest payments sourced from the profits of frozen Russian assets.
- Alternative: Rather than direct confiscation, use the assets as collateral, a move considered reversible until Russia pays reparations.
- Support: G7 countries could provide government guarantees for the bonds to attract private investors.
Belgium's Role
Belgium, which hosts the Brussels securities depository Euroclear, holds the largest portion of frozen Russian state assets, valued at €191 billion. In 2022-23, these assets generated €5 billion in investment income. Belgium has already transferred €500 million from this profit to Ukraine and has agreed to contribute more than €1 billion in taxes on this profit to a G7 joint fund for Ukraine starting next year.
Implications and Next Steps
The use of Russian central bank assets as collateral remains contentious, with critics arguing that it effectively amounts to asset forfeiture. However, proponents see it as a necessary step to provide substantial and immediate financial support to Ukraine.
The G7 meeting will seek to reconcile these differing views and develop a unified approach that balances legal constraints with the urgent need for support in Ukraine.
