Brussels, Frankfurt According to the EU Commission, the assets of Russian oligarchs could be confiscated more easily if they evaded EU sanctions. The previous legislation in the various EU countries is fragmented, explained EU Commission Vice-President Margaritas Schinas: “We only catch the small fish, while the big sharks find ways to escape.” , taking yachts into international waters or transferring assets to other owners.
The authority presented two proposals on Wednesday to collect the assets. Firstly, it wants to classify the circumvention of sanctions as a criminal offense across the EU and thus ensure that a violation can be prosecuted and punished in all member states. So far, some EU countries only treat circumvention as a minor offence. The penalties are correspondingly low.
However, criminal law is a national competence. Therefore, the Commission argues that this is a cross-border issue and requires an EU mandate. The proposal requires the unanimous acceptance of the 27 member states before the Commission can present a corresponding directive.
Second, the Brussels authority plans to tighten the directive on asset confiscation and confiscation. It is based on laws against the mafia in Italy. In the future, the suspicion that assets were acquired criminally would be sufficient to confiscate them. A court should then order that the assets in this case be confiscated – even without having passed a final judgment.
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Even with frozen assets, there are plans to lower the hurdles. Law enforcement agencies could sell assets faster to prevent a decline in value. In the debate about the reconstruction of Ukraine, these frozen Russian assets have been mentioned as a possible source of financing for days. The legal hurdles are high because private property is protected in Western countries.
Has Russia secured its currency reserves?
It is therefore questionable whether the Commission’s proposals will lead to more assets being confiscated. MEP Markus Ferber (CSU) spoke of “symbolic politics” and warned: “If we now start confiscating the assets of Russian private citizens and the courts revise all these decisions in a few months, the shot will backfire properly.”
To get around the legal problems, the Europeans, Canadians and Americans are considering making the oligarchs an offer: money in exchange for luxury living. The ultra-rich Russians could buy their way out of the sanctions. The money would be used to rebuild Ukraine – and the oligarchs could enjoy the comforts of the western lifestyle again. However, talks about this are still in their infancy. The topic was discussed for the first time at the meeting of G7 finance ministers near Bonn last week.
Around ten billion euros in private Russian assets have been frozen across Europe since the start of the Ukraine war. In the best case, part of these ten billion euros could be confiscated – namely that which is suspected of having committed a crime. That would only be a small part of the reconstruction of Ukraine, for which hundreds of billions of euros are needed.
Added to this are the frozen currency reserves of the Russian central bank. However, the G7 countries do not yet know exactly how much is actually in western accounts. The figure of 300 billion dollars, which is often mentioned in the discussion, comes from a calculation by the Bank for International Settlements from the summer of 2021. It is possible that the Russian government has brought some of the savings to safety before the invasion.
According to the EU Commission, there are around twenty billion euros in Russian currency reserves in the EU. This information is based on reports from the national central banks that are received in Brussels. The reserves are usually held by the national central banks, such as the Banque de France or the Bundesbank. There they are invested in government bonds of the respective country.
According to statistics from the Russian central bank, around ten percent of its own reserves were in Germany at the beginning of 2021. However, there is almost nothing left at the Bundesbank at the moment, according to Frankfurt financial circles. Apparently, Russia withdrew money before the sanctions came into force. It is conceivable that a part is also held by private banks.
>>> Read here: Frozen Russian fortunes – 350 billion euros for the reconstruction of Ukraine?
So far, the Bundesbank has only frozen the reserves of other central banks, currently including the Afghan central bank, for example. Seizing the reserves would be complicated. So far, there is no legal basis for this. In the US, too, it is currently illegal to confiscate foreign currency reserves as long as the country itself is not at war.
Nevertheless, several EU governments are now in favor of using the central bank’s reserves for the reconstruction of Ukraine. Federal Finance Minister Christian Lindner (FDP) is also “open” to such a step.
However, experts are skeptical: First, the benefit is questionable, argue Joshua Kirschenbaum and Nicolas Véron from the Brussels think tank Bruegel in a blog. The military balance of power between Russia and Ukraine will not be affected at all. The EU and the USA are also not so tight on funds that they cannot finance the current expenditures for Ukraine from their own budgets.
However, the principle is decisive, write Kirschenbaum and Véron. The West makes itself morally vulnerable: “To stand up credibly for a rule-based order is worth more than the billions that are gained by confiscating Russia’s money.” These doubts also concern the federal government. The seizure of Russia’s central bank assets could break a taboo. Other countries could use similar methods in the future and thus damage German interests.
In the EU, there are therefore also initial thoughts about making a deal with the Russian central bank: the EU could return part of the reserves if Russia agrees that the EU should use the rest for reconstruction in Ukraine.
More: G7 idea: Russian oligarchs can buy their way out of sanctions with their billions