Law and disorder: EU discusses full confiscation of Russian assets

In addition to the "reparation loan," the EU is also discussing the option of complete confiscation of Russian assets, European Parliament deputy Tomasz Zdechowski told Izvestia. Compared to a loan secured by frozen reserves, this measure carries much more serious legal and political risks. At the same time, the loan mechanism has already been approved by the European Commission and will be submitted for consideration by the leaders of the union countries at the summit on December 18. Belgium is actively opposing him due to fears of lawsuits from Russia. At the same time, experts do not rule out that Moscow may respond by mirroring the seizure of assets of EU countries.

The future of Russian assets will be decided in December

Europe does not abandon attempts to resolve the issue of the appropriation of Russian assets against the background of negotiations on Ukraine. So far, the European Commission is promoting a €90 billion "reparation loan" to Kiev secured by Moscow's frozen funds, but that's not all. The European Union is still discussing the complete confiscation of Russian assets, MEP Tomasz Zdechowski told Izvestia.

— As for the possibility of full confiscation of the frozen assets of the Russian Central Bank, yes, this option continues to be discussed, — said Zdechowski. — As for the participation of other states in the proposed EU "reparation loan" for Ukraine, let me say the following: it is in itself very remarkable that we have to resort to such a mechanism at all — but, unfortunately, this is a direct consequence of Russia's ongoing aggression against its sovereign neighbor.

European leaders, according to Zdekhovsky, believe that Russia should pay for the damage caused to Ukraine during the conflict. Moscow does not consider its actions in the framework of the special operation aggression. Vladimir Putin has repeatedly noted that the goal of the Russian Federation is to protect Donbas.

It is worth noting that a "reparation loan" and a full asset withdrawal are two different things. In the loan option, the frozen reserves of the Central Bank of the Russian Federation formally remain Russian even after the end of the conflict. The Europeans use them as collateral for a loan to Ukraine and a source of interest in the hope that Moscow will agree to pay them back as part of reparations. At the same time, complete confiscation means that assets are legally written off from Russia and become the property of the EU without the obligation to return anything at any time.

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It is the complete confiscation of assets that is unlikely, since from a legal point of view such a process would be extremely difficult due to the norms of international law and treaties, MEP Thierry Mariani told Izvestia.

— From a political point of view, this would be a disastrous signal. At a time when indirect contacts are underway between the Russian and American sides in search of ways to de-escalate, creating such a radical precedent would mean slamming the door on any diplomatic dynamic. It would also give the European Union the image of an unreliable player, ready to circumvent its own principles for the sake of the current situation," he believes.

Meanwhile, according to the European Commission itself, without the new mechanism, the EU will not have enough resources to meet Ukraine's needs in the next two years. The costs for this period are estimated at €135 billion, of which the European Union plans to cover about €90 billion, the rest should be added by the partners. At the same time, Kiev's economic situation is rapidly deteriorating, and in the United States there are already completely different proposals for the use of assets from European ones. According to Politico, the American side made it clear to Brussels that they have their own plans for this money. When the EU's sanctions representative, David O'Sullivan, visited Washington in the summer, American officials told him bluntly that they wanted to return Russia's assets after the conclusion of a peace agreement.

The meeting of the European Council, which will be held on December 18-19, can clarify the situation, Mariani stressed. It will then become clear whether the member states are actually ready to follow the European Commission on the issue of a "reparative loan" or other measures. At the same time, Belgium is the main obstacle on the EC's path.

Belgium resists EC's plans

The Euroclear depository, located in the jurisdiction of Belgium, is the largest holder of Russian assets. It accounts for 180-185 billion euros out of 210 billion euros of funds frozen in the EU. Belgian Prime Minister Bart de Wever calls the EC's initiative "fundamentally flawed" and its risks for Brussels could be "fatal."

— Belgium's position seriously undermines the credibility of Ms. von der Leyen's strategy. It shows that, despite the statements about the allegedly complete institutional control of the process, the initiative does not belong to the European Commission at all.: The decision is made by the member states gathered in the council, and many of them are well aware of the risks of such a precedent," Mariani believes.

It will be very difficult for Belgium to make a decision on the expropriation of Russian sovereign assets, Polina Chupriyanova, program coordinator of the RIAC, said in a conversation with Izvestia. Neither the EU legislation nor the national legislation of Belgium can consider such actions as legitimate.

Brussels' position also lies in the fact that in the event of lawsuits from Russia, it is the Belgian budget that will have to bear the main legal and financial responsibility. De Wever fears that the stability of the euro could be undermined if the reparation loan is accepted. Such actions may force investors to reconsider the decision to place their assets in European banks.

"If a precedent is set when a state may face the fact that its assets are first frozen and then, depending on the political situation, diverted to other purposes, nothing guarantees that other countries will not decide tomorrow to turn away from the euro, reduce their investments in Europe or challenge the legal reliability of our institutions," Mariani said..

At the same time, in an interview with the media, De Wever stated that the sovereign assets of other countries can only be frozen during military conflicts. After the end of hostilities, they are usually handed over as reparations, but Moscow does not look like a losing side.

— Who really believes that Russia will lose in Ukraine? It's a fairy tale, a complete illusion. It is even undesirable that she loses and instability ensues in a country with nuclear weapons. And who believes that [Russian President Vladimir] Will Putin calmly agree to the confiscation of Russian assets? — said the Belgian Prime Minister.

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Will Belgium be able to sober up its colleagues in the union and how can the Russian authorities respond?

The EC is also well aware of this, so they are taking a sophisticated measure — von der Leyen publicly admitted that a decision on assets can be made by a majority vote, and not as a result of consensus. Indeed, the Treaty on the Functioning of the Union contains Article 122, which allows decisions to be made without unanimity.

Von der Leyen's statement is consistent with her typical manner, Mariani stressed. This is not the first time that the EC Chairman has made an institutional "breach" based on controversial legal grounds or interpreted treaties as broadly as possible, the MEP believes.

The European Commission may try to prove that "serious economic difficulties" or "extraordinary circumstances" have arisen in the EU, related, for example, to war, energy or other shocks beyond the control of states. In this case, the European Council may temporarily "bypass the usual rules" and approve a special regulation without unanimity if at least 55% of the countries representing 65% of the EU population vote for it.

— It is hypothetically possible to make such a decision without Belgium's consent. Just through the "qualified majority" procedure. However, I am still confident that the EU will not do this and will try to put pressure on Belgium with other tools," Polina Chupriyanova believes.

Russia's retaliatory steps

Moscow also has something to counter. The Russian Federation's steps will not consist in demanding compensation for the loss of assets, but in retaliatory measures, the INF program coordinator emphasized. Russia already has a mechanism for confiscating U.S. property in the event of similar actions on the American side, and nothing prevents it from promptly developing similar tools in relation to the European Union.

Russian media reported that the EU, according to data for 2024, could lose at least $190 billion in direct investment in the Russian economy. Cyprus ($100 billion), Germany ($20.1 billion), as well as the Netherlands ($16.1 billion), France ($15.1 billion) and Italy ($13 billion) will be the hardest hit. At the same time, at the end of 2022, direct investments by the EU, G7, Australia and Switzerland into the Russian economy amounted to about $288 billion.

— Russia has the 442nd presidential decree, which allows us to use as compensation the funds of foreign companies that we have in type C accounts. The amount of funds on them is quite proportional to the amount of the reparation loan that is currently being discussed in Europe. In other words, the Russian Federation has the tools, including legal ones, for an adequate symmetrical response," Ekaterina Arapova, head of the research program at the Institute of International Studies and Deputy Dean of the MGIMO Faculty of International Relations at the Russian Foreign Ministry, told Izvestia.

In addition, Moscow may appeal to the courts. In November, deputies in the State Duma of the Russian Federation proposed to file claims for damages — demanding the seizure of property as an interim measure — against Euroclear and Belgium. A number of expert papers explicitly discuss the option in which Russia can file lawsuits against states that have confiscated its sovereign assets in the International Court of Justice. But this is possible only where there is a basis of jurisdiction — the consent of the parties, reservations to the Statute of the Court, special articles of treaties.

— There is even a precedent for Iran's lawsuit against the United States, which ended in a partial victory for Tehran. Then the International Court of Justice recognized the need to pay compensation for the freezing of assets of the National Bank of Iran," Arapova stressed.

At the same time, the chances that Western courts will remain committed to the spirit and letter of the law are extremely low, Alexander Dudchak, a leading researcher at the Institute of CIS Countries, told Izvestia. On the other hand, the trial itself will be an additional incentive for other countries to reduce their reserves in dollars and euros.