Group of Seven eyes Russian assets to raise funds for Ukraine

BRUSSELS: The Group of Seven (G7) and the European Union (EU) are discussing a plan to use more than Us$250bil in frozen Russian central bank assets as collateral to help fund Ukraine’s reconstruction, according to people familiar with the matter.

Under the proposal, Ukraine’s allies could sell debt to contribute to the war-torn country’s rebuilding, using the frozen assets as collateral.

Proponents believe that any settlement to the conflict under international law would find Russia liable to pay for the damage it has caused its neighbour.

Should Russia refuse, claims could be made on the frozen assets, the people said.

Discussions are currently taking place at a technical level, meaning a political decision has not yet been taken, said the people, who spoke on condition of anonymity. One of the people said some countries want to move faster than others.

The G7 has pledged to make Russia pay to rebuild Ukraine and to keep sanctioned assets frozen until it does.

Several G7 nations, including France and Germany, have so far resisted the option of confiscating the frozen assets outright because of legal concerns and the potential consequences for the stability of the euro.

The plan could allow for the creation of a special-purpose vehicle that would issue zero-coupon bonds backed by callable collateral, one of the people said.

A hierarchy would be established on the collateral that would use the assets held by Euroclear as well as banks, the person said.

The option to use the assets as collateral in the meantime, which was first reported by the Financial Times, is seen as an alternative to that route, said the people.

Russia has vowed to legally challenge any attempt to seize assets.

Any move would come on top of the EU’S plans to apply a windfall tax to the profits generated by the frozen central bank assets.

Though slowly, that plan is progressing, as Bloomberg previously reported.

The vast majority of the sanctioned assets are held by the Belgium-based clearing house Euroclear, where they generated €4.4bil in 2023, according to financial results published last week.