Borrell proposes that the EU Rebuild Ukraine with Frozen Russian Reserves

World » EU | May 9, 2022, Monday // 18:12
Bulgaria: Borrell proposes that the EU Rebuild Ukraine with Frozen Russian Reserves Josep Borrell, EU High Representative for Foreign Affairs and Security Policy @Wikimedia Commons

“It makes sense for the European Union to do with Russia's sanctioned assets what the United States did with Afghanistan's central bank funds after the country was taken over by the Taliban.”

This was stated by the head of European diplomacy Josep Borrell.

In an interview with the Financial Times, Borrell drew a parallel between assets the United States plans to use to help Afghans affected by the economic and humanitarian crisis following the Taliban's return.

Russia's foreign ministry called such a move "lawlessness" and warned it could destroy "the foundations of international agreements", according to the institution's deputy head Alexander Grushko. Such a decision would be like the "law of the jungle."

Ukrainian Prime Minister Denis Shmigal has expressed support for such an idea, saying his country is in talks with the United States and "all our partners."

In February, US President Joe Biden signed a decree transferring some of Afghanistan's central bank assets to an account with the New York Federal Reserve. In the affirmative, the administration will give them "for the benefit of the Afghan people and for the future of Afghanistan", and it is possible that while lawsuits are pending, the remaining funds could be provided to relatives of the victims of the September 11, 2001 terrorist attacks, in which more than 3,000 people died.

“We have money in our pockets and someone has to explain to me why it is good for Afghan money and not for Russian money.” - Josep Borrell, EU High Representative for Foreign Affairs and Security Policy

"Filled with logic"

The EU's High Representative for Foreign Affairs and Security Policy explains that he would support such a move largely because it is "logical" at a time when the West is discussing how Moscow can be forced to pay for some of the damage caused in the course of the conflict.

Borrell's analogy is with the United States and the decision to compensate for the victims of terrorism and provide humanitarian aid to Afghanistan (through part of the reserves, as announced in February) because the EU and allies froze, at the start of the war, hundreds of billions of dollars in foreign exchange reserves in the accounts of the Russian Central Bank. In March, Russia explained that these restrictions had frozen about 300 billion of its gold and foreign exchange reserves, or about half (as of April 1st). According to Ukrainian President Volodymyr Zelensky, his country will need $600 billion to rebuild.

In the EU - whose estimates for Ukraine's reconstruction needs also reach hundreds of billions of dollars - ways to use the reserves to rebuild Ukraine have been discussed, but Brussels has not made any concrete proposals on the subject. Borrell raises the issue as one of the ways to react, the Financial Times notes. According to the United States, such a step cannot be taken lightly, requires coordination with allies, and may require special legislation in the United States.

So far, European Council President Charles Michel and US President Joe Biden have spoken out in favor of confiscating Russian assets - but not the central bank's, but oligarchs'. However, the topic remains delicate because of the need not to cross legal boundaries and not to violate anyone's rights - confiscation of assets is possible as a result of a sentence, but not just because someone is sanctioned. However, Borrell points to the precedent with the US decision and $3.5 billion from the reserves of the Afghan central bank.

A few days ago, Russian Foreign Minister Sergei Lavrov accused the West of stealing Russian assets abroad, and that gold and foreign exchange reserves were also formed from money transferred for gas supplies. "In other words, they've been using our gas for free all these years."

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Tags: borrell, EU, Russia, reserves
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