Germany rejects EU plan to raid Russian assets

Germany has voiced objections against plans by Brussels to clear frozen assets of the Russian central bank for the reconstruction of Ukraine, warning that a hasty move could lead to legal or financial risks.

The European Commission is working on a plan that could raise billions of euros by requiring financial institutions that have tied up Russian assets to hand over part of the profits generated and use them to rebuild Ukraine.

But following concerns raised by the European Central Bank, Berlin and other capitals have called for more reflection on the ideas.
Senior German government officials said they doubted the plan would get enough support because the legal risks were too high. A foreign ministry official said Moscow “will have to pay for the damage it has caused in Ukraine” and insisted that Germany was doing “everything it legally could” to locate and freeze the assets of sanctioned Russian individuals and companies. . But he said the idea of ​​using Russian funds to rebuild Ukraine raised “complex financial and legal questions.”

“It opens a can of worms,” another German official said, adding that if the EU takes money from the Russian central bank or earns the investment proceeds from the funds, it will set a precedent for others to follow, such as reparation claims. from Poland. against Berlin for damages during the second world war.

An official said Marco Buschmann, Germany’s justice minister, had studied EU proposals to harvest Russian central bank assets and concluded they were legally unfeasible. A Buschmann spokesman declined to comment.
In a meeting with the commission on Wednesday, several diplomats urged caution and said important questions needed to be answered before making a formal proposal, people briefed on the discussions said.

Since the EU and its allies tied up hundreds of billions of euros of Russian central bank assets after the invasion of Ukraine, officials have been debating ways to use some of that money to rebuild the country.

EU officials have moved away from confiscating the assets outright and are instead looking at ways to collect some of the proceeds for kyiv. One option is for security custodians to be required to make a windfall contribution of profits generated when they reinvest proceeds from frozen Russian assets.
A senior Ukrainian official said kyiv believes the EU could raise 3 billion euros a year from Russian central bank asset holdings. The official said Ukraine was also looking at an alternative scheme whereby the commission could use the seized Russian assets as collateral against which it could borrow to invest in exchange for a return, which would go to Kiev.

“The challenge is trying to figure out what is legally sound and defensible,” said an EU diplomat involved in the discussions. “It’s more complex than anyone thought at first.”

Foreign ministers from the 27-nation bloc are expected to discuss the issue at a meeting in Luxembourg on Monday, officials involved in planning the meeting said.
Commission executive vice-president Valdis Dombrovskis said officials would have to balance the principle that Russia should be held responsible for the damage it has caused while respecting the “legal framework to protect the immunity of central bank assets, which is what the ECB is reflecting on. ”.

A commission spokesman insisted on Friday that there is “general support” from member states on this matter and that solutions are possible.

Four member state officials said they see a strong majority among EU countries in principle to use proceeds from confiscated Russian assets, while acknowledging that ECB concerns had given some capitals pause over the way to do it.
“There is a very clear and broad consensus within member states that the money, the new money generated from those frozen assets, should be, could be used,” said a second EU diplomat. “But there’s also a very clear consensus that it’s not something we can do based on a political decision somewhere, just take the money.”