EU decided to postpone theft of Russian assets
2023.01.12 06:24
EU decided to postpone theft of Russian assets
By Tiffany Smith
Budrigannews.com – It seems like a moral imperative to make Russia pay for Ukraine. The European Commission has started a plan to see if frozen Russian assets worth billions of dollars and euros can be used to help finance Ukraine’s reconstruction. From a political, financial, and legal standpoint, it is a foolish strategy.
As a result of the war, Europe’s economy is suffering from higher inflation and a significant energy crisis. It is also providing Ukraine with military and financial assistance. When they start footing the bill for Ukraine’s reconstruction, governments are wary of taxpayer exhaustion, which could lead to revolt.
There are two kinds of assets that the European Union wants. First, sanctioned oligarchs’ money in the amount of 19 billion euros. Then, central banks in the Eurozone hold an estimated 165 billion euros worth of frozen Russian reserves.
The legal foundation is fragile. Bilateral treaties preventing expropriation of individuals and businesses would have to be ignored by European governments. Furthermore, it may be difficult to trace some sanctioned oligarchs because they may have already transferred some assets to family-controlled trusts prior to the imposition of the sanctions.
If this kind of sanctions-busting became a crime, which is currently not the case in most of the EU, the legality of asset grabs would be strengthened. It would be harder to solve other issues. In particular, parties who have been wronged by the Russian government—for instance, investors whose assets the Kremlin has taken over the years or creditors in the event that Russia defaults—may attempt to recover their losses by filing claims against the assets.
There would be little financial gain. To pay for Ukraine, the idea is to only use the profits from the assets. Let’s say that all of the assets under consideration are taken away and safely invested in German government bonds with a 10-year maturity. The annual returns would be slightly more than 4 billion euros, or less than one month’s worth of the current financing requirements for the Ukrainian government. When the time comes to rebuild the nation, this pales in comparison to the more than 750 billion euros effort that will be required.
Additionally, the idea is fraught politically. Respect for treaties, protection of property rights, and non-retroactivity of laws and regulations are just a few of the fundamental principles of Europe’s legal system that would have to be violated. It also makes it harder for Russia in the future, post-Putin, to get out of the current crisis.
In effect, Europe’s economic woes are a significant tax that must be paid to support its defense against Russia’s aggression. The disruption will continue, and European governments should admit it. The fantasy of seizing Russian assets can only serve as a distraction.
A spokesman for Estonia’s foreign ministry stated on Jan. 9 that the country is working on developing a legal framework that would enable the government to seize frozen Russian assets following EU sanctions against Moscow.
On November 30, the European Commission proposed a strategy to seize and manage frozen Russian assets in order to raise funds for the war-torn nation.
According to a Bloomberg report, the German government would be open to the idea of using those assets to finance Ukraine provided that significant legal issues are resolved beforehand.
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