G7 considers using Russian assets as collateral to raise funds for Ukraine - Bloomberg

"The Group of Seven and the European Union are discussing a plan to use the frozen assets of the Russian central bank worth more than $250 billion as collateral to finance Ukraine's recovery, Bloomberg reported on February 4, citing people familiar with the situation, UNN reported.

Details

According to this proposal, "Ukraine's allies could sell the debt to contribute to the reconstruction of the war-torn country, using the frozen assets as collateral." Supporters of this solution, as indicated, believe that any settlement of the conflict in accordance with international law will result in Russia being obliged to pay for the damage it has caused to its neighbor. If Russia refuses, claims could be made against the frozen assets, they say.

"Discussions are currently taking place at a technical level, meaning that no political decision has been made yet, the people said, speaking on condition of anonymity. One of the interlocutors said that some countries want to move faster than others," the article says.

The G7 has promised to make Russia pay for Ukraine's restoration and to freeze sanctioned assets until it does so. Several G7 countries, including France and Germany, have so far resisted the option of full confiscation of frozen assets due to legal issues and potential consequences for the stability of the euro.

According to one source, the plan could allow for the creation of a special structure that would issue zero-coupon bonds backed by recallable collateral. According to the source, a collateral hierarchy will be established that will utilize assets held by Euroclear as well as banks.

Meanwhile, the possibility of using assets as collateral, first reported by the Financial Times, is being considered as an alternative to this route, people say. russia has vowed to legally challenge any attempt to confiscate assets.

Any move would come on top of EU plans to impose a windfall tax on profits earned from frozen central bank assets. Earlier, Bloomberg reported that this plan was moving forward, albeit slowly.

Addendum

The vast majority of sanctioned assets are overwhelmingly held at the Belgian institution Euroclear, where they generated €4.4 billion in 2023, according to financial results released last week. Several Russian firms have challenged the sanctions, and a number of lawsuits are ongoing, almost exclusively in Russian courts.