#UKRAINERUSSIAWAR. Frozen Russian assets could be the domino that would leave Europe bankrupt


War costs money and someone has to pay for it but money has always had one characteristic: it runs out quickly. And that’s when technical mechanisms and ideas for finding new money are triggered. Without, however, reaching into the already empty wallet.

Joe Biden, president of the United States, and the administration that depends on him, are pushing for the G7 countries to prepare a plan to use the frozen assets of the Russian Federation for the group’s summit in the summer. This is because Ukraine needs new lifeblood to continue the war. The head of the US Treasury Department said that it is not clear whether the G7 leaders will make a decision on the frozen assets of the Russian Federation at the June summit, while he is talking about it.

However, the European Central Bank, Germany and France have a different opinion and fear the confiscation of the frozen assets of the Russian Federation, Bloomberg source. The danger for Western countries is that the asset withdrawals will set a precedent that will encourage other countries to avoid holding reserves in Western currencies, the agency explains. They fear retaliatory actions by Russia against European assets, as well as the impact on financial stability and the euro’s status as a reserve currency.

Explaining it in other terms, if we allow the confiscation of frozen Russian assets it means that one day if Italy does something that the rest of the world doesn’t like, first its assets will be frozen and then they will be used to do something else without asking for the consent of the legitimate owners. This is reasoning that undermines the circularity of the economy. At this point no one will want to invest in what Europe offers anymore because the EU will be unreliable on the markets.

Not only that, there is no mention of it but there is an immediate risk and that is the bankruptcy of the banking and financial institutions in which the Russian partners have heavily invested. Because the assets of those investors would end up in Ukraine which would buy weapons and send the accounts into the red, needless to say that the Ukrainians must use that money for reconstruction at least as long as there is shooting day and night.

Something similar is already happening. Russian bank VTB may lose rights to its European branch; the bank received a notification in this regard from the German OWH SE (formerly VTB Bank Europe). In 2022, Russian top managers were removed from the management of the bank, deprived of the right to dispose of financial assets, and now OWH SE denies VTB’s right to own the German bank, demanding the return of dividends since 2013.

The bank believes that the German side deliberately hides information about VTB’s compliance with legal requirements in case of acquisition of shares of a European structure and corporate reorganisations, including the reorganization of VTB Bank (Deutschland) AG in 2017. For many years , the ownership of VTB Bank Europe did not raise doubts among European regulators. The reasons for the German side’s action lie on the political level, the bank says, and with further attacks the financiers will be forced to “take retaliatory actions against those who were once considered partners.”

And if this happens under sanctions, let’s think about what can happen with the frozen assets that would be sent to Ukraine, no one knows for what reason, at a regulatory level.

The European Parliament called for the transfer of long-range missiles to Ukraine and the confiscation of Russian assets. He did so on February 29th with a resolution in support of Ukraine. RBC Ukraine reports. MEPs call on EU countries to provide Ukraine with ammunition, air defense systems, long-range missiles, in particular TAURUS, Storm Shadow/SCALP, various types of artillery, as well as drones and weapons to counter them. Furthermore, the deputies call on European Union countries to confiscate Russian assets and transfer them to restore Ukraine and strengthen sanctions against Moscow and Minsk not knowing that this would lead to the bankruptcy of many European businesses.

Graziella Giangiulio 

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