Explainer-How the West might use Russia's frozen reserves to help Ukraine
LONDON - The G7 group of nations are looking to use nearly $300 billion worth of Russian financial assets frozen by sanctions since 2022 to help support Ukraine, but how it will be done remains highly complex given it would set a controversial precedent.Washington continues to back the idea of seizing the immobilised Russian reserves in their entirety and handing them to Ukraine.
When those assets reach their final payout days - or "mature", in banker speak - they get converted into cash, a transaction that is taxed at a rate of 25% in Belgium. Some in the bloc are still wary, though, including the European Central Bank that has warned that seizing the Russian assets should only be done in tandem with other G7 powers. They want to ensure it isn't just the euro that is affected if other countries such as China start repatriating their reserves as a precaution against them being swooped on down the line too.
There is the risk that Russia could, through court action, try and seize Euroclear cash in securities depositories in Hong Kong, Dubai and elsewhere. The worry is that this could drain Euroclear capital and require a huge bailout.'Collateralizing' the Russian assets for loans instead of seizing them outright is seen as one of the favoured options for achieving consensus between Washington, Europe and elsewhere.
Sources briefed on the plans say a loan is likely to be simpler than a bond while Singh has said the goal is to reach a decision on the frozen asset issue at the G7 leaders' annual summit in Italy in June."Reparation bonds" have also been suggested as a way of circumventing some of the legal problems. Ukraine would sell securities that pay out if - and only if - it receives reparations from Russia for the damage done by the war.
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