EU aims to seize Russian assets amid legal unclarity

Estonia, Latvia, Lithuania and Slovakia wrote a joint paper to the commission this week, urging the use frozen Russian assets for such reconstruction, which, according to Ukrainian estimates, already amounts to €560bn.

"A substantial part of the cost of rebuilding Ukraine….must be covered by Russia," the EU member states wrote, noting western countries have frozen €300bn in Russian central bank assets. "We must now identify legal ways to maximise the use of these resources as a source of funding."

But some member states, including Germany, the Netherlands, Greece and Belgium, are reluctant to embrace seizing frozen assets without clarity on its legality.

So far, the EU has not made a clear proposal that would allow it to seize and repurpose Russian central bank assets.

EU commissioner Valdis Dombrovskis said on Tuesday the 'freeze and seize taskforce' — which was set up in April to coordinate the seizure of €30bn worth of frozen assets belonging to Russian oligarchs, with US partners — will now investigate if "there is an EU basis for confiscation [of central bank assets] within international criminal law."

Legality

At the G7 meeting in Bonn last week on Wednesday, US treasury secretary Janet Yellen said seizing Russian central bank assets "was not legal in the US right now."

But this could quickly change.

In a commentary this month, international law expert Paul Stephan wrote that seizing central bank assets would "manifestly violate international law," but concluded a "constitutionally-sound law", supported by the US Congress and the president could release the US from its international obligations, opening up the possibility for seizure.

Some other countries have already pushed to change national law to allow for the seizure of Russian assets.

In April, Canada started drafting a law that would allow it to repurpose Russian assets to support Ukrainian victims.

Ukrainian president Volodymyr Zelensky on Monday also signed a sanctions law enabling government officials to seize blacklisted Russian-owned assets and property and sell them in order to support Ukraine's war efforts.

The new sanction will be in effect for as long as Ukraine operates under martial law, which the government recently extended through late August.

Russian people's money?

A move to seize Russian central bank assets is not without critics, however.

Senior fellows at the influential Brussels based think tank Bruegel, Nicolas Véron and Joshua Kirschenbaum, in a blog published last week, criticised the proposed seizure of Russian central bank assets, calling it "seductive" but also "unnecessary and unwise."

"Neither the US nor the EU are financially constrained to the extent that they would need to appropriate the Bank of Russia's money to do what they have to do," they wrote.

"Russian reserves are public money," they concluded, which was, in principle, acquired on "behalf of the Russian people [and] cannot be generally assumed to have been illegitimate."