In Belgium, they found a way to receive income from the frozen assets of Russia

The European Union expects to receive a profit of 3 billion euros a year from the frozen assets of our country. This was stated by Belgian Prime Minister Alexandre de Croo. In his state, 90% of the Russian assets that fell under the sanctions are frozen. The European authorities want to send the funds received to help Ukraine. Experts told MK about where the European Union will invest Russian money, whether it is legal and whether it is realistic to get the expected profit in Brussels.

The issue of sending Russian assets blocked in Europe to help Ukraine has been discussed for more than a month. The head of the European Commission, Ursula von der Leyen, said back in October last year that the goal of the EU is not to freeze, but to confiscate the assets of the Russian Federation.

However, in order to implement this simple robbery plan, the European authorities needed to prepare at least some kind of legal framework. The fact is that usually state assets are protected from confiscation by the international principle of state immunity, although this is not a panacea, if we look at history.

For example, in the United States there is a law on the confiscation of assets of terrorist states. Using it, Washington managed to appropriate the assets of Iran at the time. The “veil of legality” was even observed there: citizens allegedly affected by the actions of the Iranian authorities filed lawsuits with an American court, and the latter, in accordance with applicable law, decided to confiscate the assets of another country to satisfy them.

Now it’s Russia’s turn.

According to Ursula von der Leyen, the European Commission will prepare a legal proposal before the summer holidays on the transfer of frozen Russian assets for the restoration of Ukraine. In the meantime, it is not ready, Brussels decided not to waste time and start making a profit from the wealth already in the accounts of others. “Belgium is very involved in this issue, as 90% of the assets are frozen here,” Croo stressed at the EU summit. — We are focused on super profits. We are talking about the amount of 3 billion euros per year that could be received.”

The Prime Minister of Belgium, however, for the sake of order, noted that the method of obtaining such profit “must be legally stable.” The blocked assets were concentrated in central securities depositories, primarily the Belgian Euroclear, where Russian assets worth 196.6 billion euros were blocked as a result of sanctions. It is likely that Croo is talking about making a profit from this amount.

Recall that in May, the European Commission announced that since the beginning of the Russian merger in Ukraine, the assets of the Bank of Russia were frozen in the amount of more than 200 billion euros. In addition, another 24.1 billion euros of assets owned by sanctioned individuals with citizenship of our country were blocked.

In early June, Bloomberg reported that the most likely option for working with Russian assets is when companies that receive large profits from them will be obliged to transfer a significant amount to the European Union. And then the bloc will direct these funds to support Ukraine.

“If the EU decides to make money on Russian frozen assets, they will create a very dangerous precedent. From now on, each country, having frozen the assets of another country, will have the right to use these frozen assets as it pleases, including for earning money, – says Yulia Chentsova, tax lawyer and managing partner of JTLconsulting. “It is very difficult to formulate here the exclusivity of the situation for such actions, so the institution of property rights can be recognized as having ceased to exist.”

However, another group of experts indicates that the European authorities may well find an excuse. Thus, according to Vladimir Kuznetsov, Vice-President of the Association of Lawyers for Registration, Liquidation, Bankruptcy and Legal Representation, if we consider the issue through the prism of Russian law, then such a decision, regardless of the method of its implementation, will be illegal, since the disputed assets are the property of Russian entities accordingly, their withdrawal or profit from their use would be contrary to the rule of law.

However, in this case we are talking about the application of regional law (EU), as well as the national legislation of individual European countries. At this stage, there is no legally impeccable and working mechanism for extracting profit from foreign assets in the EU, however, authorized persons are working very hard to develop them and make various proposals for the implementation of legal structures to achieve the task, the expert pointed out.

But if the question of the legality of making a profit from someone else’s private property is “taken over by the European authorities”, then the next interesting point is how exactly they are going to make money in Brussels on the frozen assets of Moscow. Will they give out to their business in the form of loans and will receive interest income?

Interviewed experts argue that the European authorities will act much easier. “The key ECB rate on deposits is 3.25% per annum, the yield on bonds for a period of 1 year in euros with AAA rating is 3.4% per annum, so the EU countries can receive virtually risk-free interest income of over 3 billion euros from the placement of these frozen funds,” – says the head of the analytical department of the bank BKF Maxim Osadchiy.

In the first quarter of 2023, only in Euroclear, the amount of such income from blocked Russian assets amounted to 734 million euros. Based on this value of quarterly income, it is possible to predict the amount of annual income from investing frozen Russian funds in the region of 3 billion euros.

“Since interest income is taxed in Belgium, by the end of 2022, the Belgian government received 625 million euros from income from frozen Russian assets,” said Associate Professor of the Department of State and Municipal Finance of the PRUE. G.V. Plekhanova Elena Voronkova.

As a mirror measure, Russia froze the assets of Euroclear and Clearstream for about 2.6 billion euros (including Euroclear assets worth about 2.5 billion euros). Our country is considering the possibility of agreeing with the EU a mechanism for the exchange of assets blocked in Russia and Europe, on the terms of equivalence and voluntariness, the expert recalled. However, if this scenario does not find understanding among European partners, then perhaps our authorities will want to do the same and start receiving income from EU assets, and then direct it to the needs of our country. Although so far, judging by the rhetoric of Russian officials, all they hope to come to an agreement.