Some western banks are pushing against its proposals to redistribute billions of euros from interest frozen Russian , stated high-ranking banking sources , expressing fears that these proposals may lead to costly appeals to courts. European Union leaders agreed yesterday (21,32024) to proceed with the further elaboration of a plan aimed at using up to EUR 3 billion a year to supply weapons to Ukraine, in their attempt to strengthen Kiev’s battle against Russia, which will continue to be the owner of the underlying frozen assets. EU leaders said this revenue could be used within a few months. However, some banks express fears that they may later be found accountable in Russia, if they are involved in any transfer of money to Ukraine, and that the EU project could also be extended to account assets held in their stores by individuals and companies at whose expense sanctions have been imposed. The EU has so far not raised an issue for such an extension of its plan. Sources also expressed fears that the proposals would lead to a wider erosion of confidence in the Western banking system. The sources, which asked not to be named because of the sensitive nature of the issue, said that they have made their concerns known to the persons who make the decisions in Britain and the eurozone, pointing out that court proceedings are likely to take place when anti-Russian sanctions are relaxed or lifted at some point. Russia declares that any attempt to confiscate its funds or their interest is a ‘bludge’ that will lead to decades of legal appeals against all those involved in it. Moscow has repeatedly stated that it will proceed with retaliation if assets or income are expropriated. The Belgian central repository Euroclear holds the equivalent of EUR 190 billion in debt and cash of the Russian central bank. Western banks also hold billions of euros, UK pounds and US dollars in assets belonging to companies and individuals subject to sanctions. More than 3.5 million Russians have abroad frozen assets worth about 1.5 trillion rubles (16.32 billion dollars), Russian Finance Minister Anton Siluanov said last year. Under the EU plan, about 90% of the cash seized will be channelled to the European Peace Fund to buy weapons for Ukraine. The rest will be used to recover the country and rebuild it. The sanctions laws of the EU, Britain and the US provide for the freezing of assets of the parties targeted, but not their seizure. Assets may be confiscated under British law, but only if they are deemed to be proceeds of crime. If interest from these assets is allowed to be seized and redistributed, banks will be in danger of appeals from the owners of these assets, according to the sources. One source warned about the precedent created by this proposal and about the “use as reserve and asset weapons deposited abroad”. In response to Western sanctions, Russia itself has seized assets, installed new administration in Western subsidiaries and has forced companies that left the country to sell with huge discounts. A second person said his bank is asking for legal advice on the guarantees it could ask to participate in the EU project. “If these proposals go ahead, the entire legal architecture will need to be changed,” says Paul Feldberg, partner and head of the Brown Rudnick company in London. “As far as banks are concerned, I think they are right to worry because we already have a huge amount of court proceedings in relation to sanctions,” Feldberg added. Moscow warns that any seizure would be a blow to property rights, would harm confidence in Western bonds and coins and would torpedo confidence between central banks.
EU: Bank pressure against the proposal to redistribute funds from Russian assets
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