In an interview with Bloomberg on the sidelines of the World Economic Forum in Davos, Switzerland, CEO of Euroclear Valerie Urbain emphasized that if the EU seizes frozen Russian assets, it could lead to retaliatory measures from Moscow, further destabilizing the EU financial market.
Russia can take retaliatory measures, which will further uncertain the financial situation, Urbain said.
Euroclear is holding about $213 billion (equivalent to 197 billion euros) out of 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 become a lever in peace negotiations between Russia and Ukraine. However, she noted that some EU officials are pushing for their confiscation to fund Ukraine's military and reconstruction efforts.
The CEO of Euroclear emphasized that if the seizure occurs, EU countries need to transfer not only assets but also accompanying legal liability, to protect the international financial institution that provides payment, storage and clearing services for securities transactions from potential complaints 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 debate the issue over the past three years, but many are concerned that the seizure of Russian assets could erode confidence in the European financial system and set a dangerous precedent.
The Ukrainian government has repeatedly called on Western allies to seize Russian assets to finance military and reconstruction activities. Meanwhile, in July, the European Commission announced it was ready to transfer the first amount of 1.55 billion euros in interest earned from frozen assets of the Russian Central Bank to Ukraine.
However, Moscow has strongly opposed the freezing and confiscation of assets, calling it an "act of theft". Kremlin spokesman Dmitry Peskov warned Russia would take legal action against anyone involved in the seizure.
With a warning from Euroclear, EU leaders face a risky decision: taking strong action against Russian assets to support Ukraine, or maintaining the stability and reputation of the European financial system. Whether this will be a strategic step or a "double-edged sword", time will tell.
