The European Union is withdrawing profits from assets – Kommersant FM
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The European Commission has decided what it will do with blocked Russian state assets. At the end of 2023, Brussels approved a mechanism according to which income from frozen funds will be directed to special accounts. And then, after all necessary taxes have been written off, the money should go to the budget and go to help Ukraine. After the outbreak of hostilities in Ukraine, the EU countries, G7 and Australia froze the assets of the Central Bank of almost $300 million. But most of them are located in the European Union. Will Brussels be able to implement this plan? And how will Moscow react? Vladislav Viktorov sorted it out.
The European Union has been thinking about which mechanism to choose for the confiscation of frozen Russian assets almost from the very beginning of hostilities in Ukraine. But Germany, France and Belgium consistently opposed complete withdrawal. They said that EU laws do not allow countries to do this with foreign funds, and if the community does not follow them, then partners may stop trusting the EU. Therefore, the discussions led nowhere.
Already in September 2023, the countries returned to this issue again, but now it was about the confiscation of income that the assets of the Central Bank bring. According to the developed mechanism, at the first stage the money will be transferred to special accounts where they should be stored. But this cannot be called a final document, says Ekaterina Orlova, head of the legal practice of Grace Consulting Ltd:
“It’s too early to say that the mechanism has actually been developed and approved. Now we are talking exclusively about the fact that profits from the assets of the Central Bank will be accumulated in separate accounts in the depositories of the European Union.
“Afterwards, the appropriate taxes will need to be paid from this profit, then all expenses will be deducted, and only after that there will be a base that can subsequently be used to restore Ukraine.”
In total, a little more than $200 billion is blocked in accounts in European depositories, and another $100 billion is in the United States. Judging by the latest quarterly reports of the Euroclear depositary, in just 9 months of 2023 it earned €3 billion from reinvesting blocked Russian assets. According to the European Commission, they should be transferred to special accounts. However, depositories store not only the assets of the Central Bank, but also those of private investors, who also suffered due to sanctions.
According to Euractiv, the European Commission recommends transferring income from all frozen funds, not just those belonging to the regulator, to special accounts. Moscow may regard this as illegal enrichment, notes Denis Primakov, head of the Sanctions Law and Compliance practice at KIAP AB:
“We cannot have any profit from taxes, because everyone is obliged to pay taxes to the state. On the other hand, from what means does a person or company pay these taxes? And this amount can be considered as unjust enrichment. But then each broker needs to be sued for unjust enrichment. Another question: how to distinguish from the total amount of income received what came from the assets of the Central Bank, and what percentage from the assets of private individuals?”
At the same time, Eduard Savulyak, director of the Moscow office of Tax Global Consulting, doubts that the Russian authorities will try to challenge the decision of the European Commission. According to him, from a formal point of view, Brussels’ actions look legitimate, simply because they do not use the assets themselves. At the same time, according to the expert, there was no need to develop a separate mechanism for this:
“At the moment, everything is quite legal – some depository or bank, using blocked assets, receives income. He has assets, income, fees for servicing these assets and, accordingly, profit.
Due to the sheer number of assets, the profit is quite large, but there is no point in Russia butting heads with anyone. Although the actions of the European Commission look complicated. They could issue an interstate loan, roll it over and not have to collect it.”
As soon as the income from the assets arrives in special accounts, the Council of Europe will have to hold another vote in order to transfer them to the budgets, and then to Ukraine. But this requires a unanimous decision. At the same time, the media note that the main risk lies in the fact that Moscow will simply seize the assets of the European Union, which are also blocked inside Russia. According to the head of the Ministry of Finance Anton Siluanov, there is enough money in special accounts to compensate for the seized state assets.
Everything is clear with us – Telegram channel “Kommersant FM”.
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