British proposal to use frozen Russian assets for Ukraine reconstruction faces resistance
David Cameron argues that there are both moral and economic reasons to utilize an estimated 315 billion dollars of Russian assets housed in Western banks for Ukraine's rebuilding. Over 10 percent of this sum, approximately 34.6 billion dollars, resides in Great Britain. Cameron unveiled his idea to his G7 allies last weekend.
12:28 PM EST, February 20, 2024
Bankers are Worried about Potential Repercussions
Nonetheless, financiers in the City have reservations, as "i" reports. They fear London commandeering the Russian Central Bank assets may damage client trust. Customers may be reluctant to invest money in Great Britain if their assets could be seized. The bankers' trace anxieties extend to state assets and central banks, not exclusively individual assets.
A high-ranking official of a global bank headquartered in London told the newspaper that banks would demand legal assurance should Cameron's plan be enacted. They're concerned that without such certainty, the seized Russian assets could be directed not toward Ukraine's reconstruction but instead funneled into the British budget.
"i" highlights that the European Union also harbors doubts about confiscating central bank assets due to anxieties over legality and potential disruption to the global financial system. Such apprehensions were also voiced by British ministers at the global economic forum in Davos.
Besides examining the central bank's assets, the British government is also formulating a plan to use funds from the frozen accounts of sanctioned individuals for Ukraine's reconstruction. The government already holds the right to freeze assets until Russia reimburses for the damage caused. It can also require sanctioned individuals to disclose their assets located in Great Britain.
Conservative Party MP Bob Seely, at the helm of a parliamentary group on Russia, advocates that "state assets should be viable for acquisition." However, he agrees that seizing the assets of oligarchs who haven't been substantiated to have violated any law may be challenging. State assets, therefore, seem to be the most appropriate path. Russian state assets overseas are plentiful and will be more than able to fund Ukraine's weapons and reconstruction, remarks Seely.
A Step Towards Utilising Profits from Frozen Assets
It's worth noting that last week, the Council of the European Union decided to move closer to the potential use of profits generated by Russian assets frozen in the West for Ukraine's reconstruction.
In layman's terms, though the assets and reserves of the Russian central bank are immobilized, they still generate revenue (like interest). But, as the Central Bank of Russia can't control it, the central securities depositories (CSD) become its administrators.
The Council of the European Union requires the CSDs to deposit these revenues from frozen Russian assets into separate accounts, where they will accrue further interest. The EU Council could potentially acknowledge these latter earnings as a financial contribution to the EU budget for Ukraine's support and reconstruction in the future.
