Euroclear, a Brussels-based clearing house, announced it will transfer €1.55 billion from interest generated by frozen Russian funds to support Ukraine. This decision follows EU and G7 discussions on using Russia’s immobilized assets, totaling €210 billion, sanctioned due to the Ukraine conflict. The first payment will aid Ukraine’s defense, with more funds to follow, despite Russia’s claims that such actions amount to theft and warnings of severe repercussions.
The depositary and clearing institution Euroclear, located in Brussels, has said that it will send the money to Ukraine and seize any interest earned from the frozen Russian funds it currently holds.
“In July 2024, Euroclear will make a first payment of €1.55 billion to the European Fund for Ukraine following the recent implementation of the EU regulation on the windfall contribution,” Euroclear said in a statement on Friday.
It comes after months of discussions among the G7 and EU about what to do with billions of euros that Russia’s central bank has stashed away due to sanctions relating to Ukraine reports Euroclear.
The declaration was made as part of a report on the financial outcomes for the first half of 2024, which showed that the clearing house had accrued interest of €4 billion ($4.36 billion) over the course of the six-month period, of which €3.4 billion ($3.7 billion) had been produced by frozen Russian assets.
The windfall is €1.7 billion ($1.85 billion) after taxes, of which €1.55 billion ($1.7 billion) will be sent to Ukraine. The remaining amount will be “set aside as a buffer against risks that are present and future.” The announcement also stated that a total of €836 million ($910 million) in corporation taxes will be paid to Belgium. “Diligently implement the international sanctions on Russian assets,” according to Euroclear, is what it is still doing.
Approximately €210 billion ($229 billion) in sovereign assets owned by Russia’s central bank were blocked by the EU as part of the sanctions placed on Moscow due to the situation in Ukraine. The privately owned depository is where the majority of the money is kept. According to a recent estimate from the clearing house, the assets produced around €4.4 billion ($4.8 billion) in interest income in the previous year.
The EU Foreign Affairs Council declared in June that Ukraine would be eligible to receive windfall gains from Russian money that had been stalled. It stated that an additional €1 billion would be released before the end of the year and that the first tranche would be utilized to buy air defense equipment and ammunition.
The US and the UK, two of the G7 members, had been advocating for the complete confiscation of Russian assets. The decision to spend the money’s interest instead was made due to uncertainty regarding the legality of the action.
Russia has maintained that any action against its assets would be considered “theft,” claiming that taking the money or making any other comparable acts would be against international law and would result in retribution.
Financial impacts of the Russian assets in H1 2024
- The Russian sanctions continue to have a significant impact on Euroclear’s earnings. €3.4 billion of the €4 billion interest income generated relate to Russian sanctioned assets.
- Applicable to CBR assets dating from 15 February 2024 onwards, the newly introduced EU windfall contribution after tax amounts to €1.7 billion. Euroclear will make a first payment of €1.55 billion* to the European Fund for Ukraine.
- The remainder of the profits related to sanctioned assets are being put aside as an important buffer against current and future risks.
- The sanctions and Russian countermeasures resulted in direct costs of €48 million and a loss of business income of €13 million.
This week, Dmitry Peskov, a spokesman for the Kremlin, issued a warning that “illegal attempts to rob the Russian Federation” would seriously harm the global financial system.
Previously, GreatGameInternational reported that Russian President Vladimir Putin issued a decree on Thursday enabling the government to confiscate American assets in Russia, encompassing real estate and belongings. This is in response to potential US seizures of Russian assets.
One Response
“Don’t expect that once you exploit Russia’s weakness, you’ll reap dividends forever. Russians always come for their money. And when they come – don’t rely on the Jesuitical agreements you made them sign. They are not worth the paper they are written on. Therefore, either play fair with the Russians or don’t play at all.” Otto von Bismarck (1815-1898)