Ukraine requires financial support, yet Europe hesitates to utilize funds from Russia's reserves.
European nations are grappling with a tricky financial dilemma, sparked by three years of conflict in Ukraine: should they confiscate the $229 billion of frozen Russian central bank funds stored within the European Union? Last week, French lawmakers proposed a non-binding resolution urging the government to use these assets to finance military aid for Ukraine and its reconstruction.
Similar legislations are already in place in the United States and Canada, giving their governments the power to seize frozen Russian assets. In the final days of the Biden administration, efforts were made to persuade European allies to take a similar action.
While some progress has been achieved, as evidenced by the European Parliament's resolution to confiscate Russian frozen funds for Ukraine's defense and reconstruction, the final text has yet to be voted on by the parliament's lawmakers. European governments, however, remain wary about seizing these funds due to economic and legal concerns.
The economy-related apprehensions revolve around the fear that confiscating Russian assets could discourage foreign investment in Europe, particularly from countries like China, which might be hesitant to invest if there's a risk of sanctions or asset seizures. Historically, Russia has moved its official funds out of the US due to concerns over repercussions over its past aggressions in Ukraine and Georgia.
Legally, Europe's hesitancy stems from the principle in international law that overseas assets of a state are typically immune from seizure. The justification for seizing the principal of Russia's assets would therefore need to be well-grounded, such as reparations for Russia's damage to Ukraine and bolstering Ukraine's defense capabilities. The strongest legal arguments Europe could use are these, according to Professor Frédéric Dopagne, a public international law expert at the University of Louvain in Belgium.
However, the implications of such action are far-reaching. Sacking a portion of Russia's wealth could undermine trust in European financial systems, potentially causing a ripple effect in the global economy. Moreover, as the EU holds around two-thirds of all frozen Russian funds, a full seizure would have more significant implications for European governments than it would for the US.
Despite the concerns, the reality is that Europe will continue to shoulder the financial burden of supporting Ukraine. The EU is already using the interest from the frozen funds to back multi-billion-dollar loans to Ukraine, but this may not be enough in the long run. If outright seizure is off the table, the support of European taxpayers will remain crucial, according to academics like Professor Olena Havrylchyk from Paris' Panthéon-Sorbonne university.
Havrylchyk believes that a nuclear-armed Russia will never agree to pay reparations as part of a peace deal, making the frozen funds a potential source of compensation for Ukraine. "The world isn't ruled solely by economists," she said. "International law is above all for justice, not just property rights."
- Despite the legal concerns and economic apprehensions, some European governments might agree to confiscate a portion of the frozen Russian funds to provide military aid for Ukraine and fund its reconstruction.
- The seizure of Russia's assets could deter foreign investment, particularly from countries like China, due to potential risks of sanctions or asset seizures.
- If outright asset confiscation is not an option, European taxpayers' support will remain crucial for Ukraine's financial future, as the frozen funds interest may not be sufficient in the long run.
