After a long period in which this issue seemed parked, the EU resurrects the idea of a total confiscation of frozen Russian assets. Since the war began one of the most important measures from Brussels was the blockade of the Russian assets called in euros. This measure has been in crescendo until reaching frozen reserves of 210,000 million euros. Although this immobilizes a part of the Russian financial muscle (which could no longer be used in the war) at all times seemed to respect the idea that Only this money was ‘temporarily blocking’. However, as the war has been gathered, the voices that ask to keep the integrity of this money, an option that has returned strongly. However, the company in charge of guarding those assets (Euroclear) has not been warning that the damage it would generate for Europe would be much greater than the money that would be achieved in the short term. Experts also add that the euro would be the main harmed of the measure.
Until now this debate seemed to have been resolved with a Solomonic solution. Russian assets would not be touched but the interests that are generating them (bond yields, for example) would be used in loans to Ukraine worth 35,000 million of euros. With this ‘creative’ mechanism by Brussels, approved in October, the problem seemed to be solved. Those who wanted to use the Russian funds saw their desire in part, while the impact that this measure could have to the maximum. However, now, with the arrival of Donald Trump to the White House there are less and less certainty about the future of Ukraine financing and this debate has emerged again.
This week the option has set its peak. This same Monday the European Commissioner of Economics, Valdis Dombrovskis, defended that force Moscow to “pay” for their almost three years war In Ukraine. In that context, he said that the best way to achieve this goal was through these Russian assets, an option that must be “strongly considered.” This was not an isolated statement. During one of his first interventions the new high representative of the Foreign Union Kaja Kallas defended this measure. “I will not use the word confiscation because it is really to use the assets legally,” he said during his parliamentary confirmation hearing in November.
Euroclear, the company that manages 180,000 million of these frozen Russian assets has shown their critical opinion during the Davos forum. The executive director, Valerie Urbain, commented that “there will be consequences” if this money is seized. In fact, he anticipates that later days there will be Great volatility in financial markets. “There could always be countermeasures by Russia that could further destabilize markets.”
This has been only the last statement of Euroclear. However, in an interview with Bloomberg, Urbain went further and commented that “The risk is to create a precedent for the euro, Because the confidence that has been had for decades in the system, has suddenly questioned. “The directive believes that, seeing the situation, countries that right now bet strongly for creating large portfolios of assets called euros can go undoing their positions, damaging the global role of the currency.
The paradigmatic example is China, which has the largest reserves in the world. However, it is a global problem, the euro is the second reference currency for the world’s central banks, in fact according to IMF data there are 2.36 billion euros in the world’s reserves. “I don’t think it’s just the Chinese. It can be Any of the central banks They would realize that, suddenly, the assets of the Central Bank do not benefit from the legal framework that has been used for decades, “said Urbain.
Hit in the euro
From GIS they comment that of making this decision “A precedent would be created and a very risky game would start“. Beyond the legitimacy and legal problems that they can derive because they have doubts that in the framework of the rule of law the assets can be removed from a state with which you are not at war, the problem would come over the euro. “The proportion of this currency in world reserves is 20% with only a very small percentage of the world’s population.”
To start the consultant comments that “most of the reservations of Russia are called in euros, so it would generate a disproportionate impact“. Then, already in the medium term” a very real risk of this gesture of the currency as a safe refuge and as an unwanted consequence would be generated, this can further reinforce the dollar. “
From Quincy Institute, Ryan Martínez Mitchell, non -resident member and associate professor of Law at the Chinese University of Hong Kong, coincides with the impact of this measure. “Confiscar the assets would be a gift for Beijing“The main reason is the coin of the Asian giant would gain positions in his career to become a global reference. For Martínez Mitchell,” the appeal of the euro has been based on numerous ingredients, among which obviously are economic productivity, the stability and growth potential of Europe; However, its apparent security for asset holders compared to the American financial system, more armed, is also a key factor. “
“The assets would be seized”
Not everyone agrees, from the Official Forum of Monetary and Financial Institutions (OMFIF) they comment that “It doesn’t make much sense to protect Russian property When Russia itself is flagrantly destroyed to Ukraine, and a much greater cost than the sum of the reserves of the Russian Central Bank. The same can be said of respect for Russian sovereign immunity. The story is full of repair examples. “
Mark Sobel, president of the Think Tank believes that the arguments that this would weaken the dominant role of the euro are “very” and “little convincing.” The reason, according to the expert, is that foreign holdings of assets in dollars and euros “are largely in the hands of countries with which they have close links.” For example, “about three quarters of the United States safe assets are in the hands of countries that have alliances with the United States.” At the same time the United States and Europe “They have the deepest and most liquid capital markets in the world. The effects of network and inertia reinforce the domain. There are few alternatives to these coins. “
“The seized assets would allow Ukraine to defend between three and four more years without any additional cost”
According to OMFIF for Europe and the role of the euro would have much more weight “polishing the bond market, generating a large joint debt market” or “allowing the Capital market union progress significantly. “These two approaches would have a much greater weight in the euro as a global currency than the impact, positive or negative, of their decision on Russian assets.
For his part, the founder of Heritage Capital, Bill Bowder, has warned this week in Davos that the price for Europe not to keep these funds is much greater than the amount in itself. According to the financial leader “the seized assets would allow Ukraine defend between three and four years without any additional cost“This would allow to have more guarantees of a peace that maintains the balance of the region while an agreement in which Ukraine loses” would force to critically increase the military spending of Europe and cause a great exodus of refugees “, with the consequent economic impact of its management.
“That money should be confiscated quickly and delivered to Ukraine, so that Do not be Donald Trump who determines his future. If we are forced to a total capitulation, we will end in Western Europe, in the United Kingdom, with between 15 and 20 million refugees “said Bowder.
In summary, there is an increasingly fierce debate (again) about the use of these assets. Which can also become a decisive currency and a totally decisive element in a true turning point. Trump has already expressed that he will seek to end as soon as possible with war and use kyiv financing as his main pressure tool. In that sense in the coming months could define the end of the conflict Or, at least, a new phase in Europe has this as under its sleeve. A large mountain of Russian money that is emerging as a double -edged sword.
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