In an interview with Bloomberg on the sidelines of the World Economic Forum in Davos, Switzerland, Euroclear CEO Valerie Urbain stressed that if the EU seizes frozen Russian assets, it could lead to retaliatory measures from Moscow, further destabilizing EU financial markets.
“Russia could take retaliatory measures, which would further destabilize the financial situation,” Ms. Urbain said.
Euroclear holds about $213 billion (197 billion euros) of the nearly $300 billion in assets of the Russian Central Bank frozen by the US and EU after the Ukraine conflict escalated in February 2022.
Ms. Urbain said that these frozen assets could be used as leverage in Russia-Ukraine peace talks. However, she noted that some EU officials are pushing for their seizure to finance Ukraine’s military and reconstruction efforts.
Euroclear's CEO stressed that if confiscation occurs, EU countries need to transfer not only the assets but also the accompanying liabilities, in order to protect this international financial institution specializing in providing payment, custody and clearing services for securities transactions from potential claims from Russia.
Ms Urbain also warned in December that using Russian assets or profits from them to finance Ukraine could threaten the role of the euro as a global reserve currency and negatively affect the EU's financial stability.
Several EU and G7 countries have been debating the issue for the past three years, but many fear that the move to seize Russian assets could erode confidence in the European financial system and set a dangerous precedent.
The Ukrainian government has repeatedly called on its Western allies to seize Russian assets to finance its military and reconstruction operations. Meanwhile, in July, the European Commission announced that it was ready to transfer the first tranche of €1.55 billion in interest from frozen Russian Central Bank assets to Ukraine.
However, Moscow has strongly opposed the freezing and confiscation of assets, calling it “theft.” Kremlin spokesman Dmitry Peskov warned that Russia would take legal action against anyone involved in the seizure.
With Euroclear’s warning, EU leaders face a fraught decision: take aggressive action against Russian assets to support Ukraine, or maintain the stability and credibility of the European financial system. Whether this will be a strategic move or a “double-edged sword” remains to be seen.