France and Germany have warned that outright confiscation would reflect badly on the West’s financial system
A rift is growing between Western allies over confiscating frozen Russian assets to help Ukraine as they continue to argue over legal ways to use the immobilized funds, Bloomberg reported on Wednesday.
The West has frozen roughly $300 billion in assets belonging to the Russian central bank since the start of the Ukraine conflict.
The US and UK have been pushing for actions to outright seize these funds in order to fund the government in Kiev.
US Treasury Secretary Janet Yellen this week insisted that the legal and moral foundations for confiscation were strong, while UK Prime Minister Rishi Sunak urged Western countries last week to be “bolder” in their efforts to tap the assets.
The EU, however, has been warning about the legal and financial implications of such a move. Speaking on the sidelines of a meeting of finance ministers from the G20 group of major global economies in Sao Paulo on Wednesday, French Finance Minister Bruno Le Maire publicly challenged Yellen’s view that it would be legal to tap the Russian funds, revealing deep divisions among G7 countries.
“We don’t have the legal basis to seize the Russian assets now,” Le Maire said. “We need to work more.”
The EU is looking into “a legally secure step that can also be implemented in the short term” to use proceeds such as the interest earned from the frozen assets to aid Kiev, German Finance Minister Christian Lindner told reporters on Wednesday.
The revenue generated by the frozen Russian assets last year amounted to €4.4 billion ($4.8 billion). European Commission President Ursula von der Leyen suggested using the proceeds to fund weapons supplies for Kiev.
Washington supports the windfall tax idea but argues that more significant action is justified. The issue has grown in importance since a $60 billion American aid package to Ukraine has been blocked by the Republican-led US Congress.
Meanwhile, according to Bloomberg, France and Germany, along with the European Central Bank, have expressed the most concern that seizing the funds could negatively affect financial stability and erode trust in the euro’s status as a reserve currency.
Moscow has repeatedly warned that any actions taken against its assets by the US or its allies would amount to “theft,” stressing that seizure of the funds or any similar move would violate international law and undermine reserve currencies, the global financial system, and the world economy.
