5/25/23, 11:34 AM Immersive Reader

EU discusses plan to send

profits from €196.6bn of
frozen Russian assets to
Ukraine

Receive free War in Ukraine updates

We’ll send you a myFT Daily Digest email rounding up the latest War in
Ukraine news every morning.

The EU has discussed sending Ukraine the profits generated by billions of

euros of Russian assets that are stuck inside the plumbing of global financial
markets.

Officials from member states and the European Commission met on

Wednesday to explore options for siphoning off the interest generated by
Russian assets held at Euroclear, the world’s biggest settlement house,
according to people familiar with the matter.

read://https_www.ft.com/?url=https%3A%2F%2Fwww.ft.com%2Fcontent%2F68af1b50-2088-4128-a2fd-f35cde914eaf 1/3
5/25/23, 11:34 AM Immersive Reader

Such a move would stop short of expropriating the assets themselves but
would still amount to an escalation in the west’s financial pressure on Russia,
with the aim of helping Kyiv defend itself from Vladimir Putin’s war.

Sanctions have frozen €196.6bn in Russian assets at Euroclear, according to

the Belgian government, of which €180bn are Russian central bank assets.

The assets are generating cash from coupons and redemptions, which have
been stuck for up to a year.

That cash is reinvested by Euroclear and it is the profits generated by the

reinvestment that EU officials are interested in diverting to Ukraine.

As a standard practice, Euroclear lends out its clients’ cash balances to

minimise credit risk and retains the interest earned. The current environment
of high interest rates, together with the unusual accumulation of payments
due to the sanctions, have led to bumper profits for the settlement house. In
the first quarter of this year, Euroclear reported €734mn of interest on cash
balances from Russia-sanctioned assets.

“It’s not entirely clear who this interest belongs to,” one person familiar with
the discussions said. Tapping into the interest for the benefit of Ukraine was
“uncharted territory”, the person said, “but we believe that it could be done”.

Some officials believe this principle could be applied to a broader range of

frozen Russian assets, including those stuck at Luxembourg settlement house
Clearstream.

Another person familiar with the matter said that “financial institutions don’t
know what to do with this money” and that the option of diverting profits to
aid Ukraine seemed promising.

Several people cautioned that the legal implications still needed to be

reviewed, and such a move would likely need broader international backing as
it could affect financial markets. Euroclear held €35.6tn of securities in 2022.

The EU is also considering actively managing the profits to generate more

money, the people said. This could be done through an asset management

read://https_www.ft.com/?url=https%3A%2F%2Fwww.ft.com%2Fcontent%2F68af1b50-2088-4128-a2fd-f35cde914eaf 2/3
5/25/23, 11:34 AM Immersive Reader

vehicle, or through Euroclear itself, which would invest the assets according to
instructions.

However, that move could have legal implications for an institution that
usually only acts as a custodian. One person said a balance needed to be found
between “protecting the role of Euroclear” and “siphoning off money to
Ukraine”.

Euroclear is facing lawsuits from counterparties in Russia to force the

company to hand over the payments. The settlement house said in March it
would not distribute “any profits related to the Russian sanctions until the
situation becomes clearer”.

The Belgian government has said separately that it intends to use the tax
income from the profits generated by the frozen assets at Euroclear to help
Ukraine, spending the money on military and humanitarian assistance as well
as to help refugees. According to a government official, Belgium expects to
earn at least €625mn in tax from the interest this year.

EU officials aim to present more concrete proposals regarding the Russian

assets at a meeting of EU leaders at the end of June.

The commission said it “has been exploring ways of using Russian frozen and
immobilised assets” to “ensure that Russia pays for the damages caused in
Ukraine”. It said that discussions were ongoing with international partners
but were “both legally and technically complex”.

Euroclear and Clearstream declined to comment.

Additional reporting by Philip Stafford in London

◼

read://https_www.ft.com/?url=https%3A%2F%2Fwww.ft.com%2Fcontent%2F68af1b50-2088-4128-a2fd-f35cde914eaf 3/3