Key points
- €210 billion held after 2022 invasion
- Funds may support Ukraine via bonds
- ECB warns of euro stability risks
FRANKFURT: European Central Bank President Christine Lagarde has warned that any European Union move to use frozen Russian state assets to finance Ukraine’s defence or reconstruction must fully comply with international law, stressing that the ECB is “very attentive” to the legal and financial implications.
Her remarks come as EU leaders explore using part of the €210 billion in frozen Russian funds to back a proposed “Reparations Loan” for Ukraine through bond investments.
The EU is currently exploring ways to fund Ukraine’s defence and reconstruction using part of the €210 billion in Russian sovereign assets frozen in the West following Moscow’s 2022 invasion of Ukraine, reports Reuters.
As outright seizure of these assets would breach legal norms, EU political leaders are developing a proposal to invest the Russian funds in zero-coupon bonds issued by the European Commission, backed by guarantees from EU member states.
The funds raised would be channelled into a “Reparations Loan” for Ukraine.
“We very much expect that any scheme that is discussed and eventually introduced at some point in time will be done in accordance with international rules, with international law,” Lagarde told EU lawmakers in Strasbourg.
Legally dubious move
She expressed concern that any legally dubious move could harm the euro’s reputation and deter investors from holding euro-denominated assets, potentially threatening financial stability.
“From my vantage point, and with in mind financial stability and the strength of the euro, we will be looking very attentively to make sure that what is proposed is in accordance with international law (and) is mindful of financial stability,” she told a parliamentary session.
At the start of the conflict, the frozen Russian funds had been invested in bonds. These bonds have since matured, and the cash is now held at the Euroclear central securities depository in Belgium.
Lagarde also emphasised that any decision regarding the use of these funds should be agreed upon by all parties in possession of the Russian assets.
