Germany has raised concerns over the European Commission’s plan to use frozen Russian Central Bank assets for Ukraine’s reconstruction. The plan involves requiring financial institutions holding immobilized Russian assets to hand over some of the profits they generate, with the aim of raising billions of euros. However, German lawmakers have pointed out that the EU legal system only allows for the freezing of assets, not their expropriation.
Senior German government officials have expressed doubts about the plan’s viability due to the legal and financial risks involved. While Germany is committed to locating and freezing the assets of sanctioned Russian individuals and companies, officials have warned that using Russian funds for Ukraine’s reconstruction raises complex financial and legal questions.
One German official warned that if the EU were to take money from the Russian Central Bank or reap the profits from investing the funds, it would set a precedent for other countries to pursue similar claims. Poland, for example, could use this as leverage for its World War II reparation claims against Germany.
Germany’s Justice Minister, Marco Buschmann, has reportedly studied the EU proposals and concluded that they are legally unworkable. At a recent meeting with the European Commission, diplomats from several countries highlighted the need for caution regarding the proposal.
The EU and its allies have frozen hundreds of billions of euros of Russian Central Bank assets as part of their sanctions policy. However, they have so far rejected calls to confiscate these assets outright. Instead, they have explored ways to harvest some of the proceeds for Ukraine.
One suggested option is for securities depositories to make a windfall contribution from the profits generated when they reinvest the proceeds of frozen Russian assets. This could potentially raise €3 billion ($3.2 billion) annually for Ukraine’s reconstruction.
In addition to this plan, Ukraine is considering an alternative scheme where the European Commission could use seized Russian assets as collateral for borrowing and investing for a return designated for Ukraine. The challenge, according to EU diplomats involved in the discussions, is to find a solution that is legally sound and defensible.
Foreign ministers from the 27-nation EU bloc are expected to discuss the issue at a meeting in Luxembourg. Moscow has strongly condemned the EU’s seizure of its assets, referring to it as theft. Russian President Vladimir Putin has described the measure as “medieval”.
The debate over the use of frozen Russian assets for Ukraine’s reconstruction demonstrates the complexities surrounding international sanctions and the legal limitations imposed by the EU system. Finding a solution that addresses these concerns while providing financial support to Ukraine is a key challenge for EU officials.
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