Europe Freezes Russia’s ₹18.9 Lakh Crore Assets, Plans To Divert Funds Toward Ukraine Amid Rising Tensions

International News:  Following the Russian invasion of Ukraine, Western countries have frozen Russia's central bank's assets in Europe, amounting to 210 billion euros (18.9 lakh crore rupees). This means Russia can no longer access this money. The European Union (EU) now wants to use this money to aid Ukraine, but this is difficult to do because international law prohibits the seizure of a country's assets without its permission.

The EU is working on a new plan to use this money. Russia has described this plan as theft of its assets. Russia says it will respond strongly if its assets are seized. Let's find out what plans the EU has made for using the Russian money...

What is the EU's plan?

Russia's frozen funds are held by Euroclear, a Belgium-based institution. Russian Central Bank bonds were deposited there. These bonds matured, but due to EU sanctions, Russia's funds were stuck. Now the EU wants this money transferred from Euroclear to a new entity called a Special Purpose Vehicle (SPV). This entity will be owned by European governments. In return, the EU will provide Euroclear with zero-coupon bonds. These bonds will not bear interest but will be guaranteed by European governments. This will prevent the seizure of Russian assets, but the money will be used to aid Ukraine.

How will Ukraine be helped?

The EU will provide this frozen money as a compensation loan. This means Ukraine will be able to use the money now and return it only after receiving war compensation from Russia. This will provide Ukraine with immediate financial assistance. Russia has approximately $300 billion (₹24.9 lakh crore) of assets frozen worldwide, of which $229 billion (₹19 lakh crore) is held in Europe. EuroClear holds approximately €185 billion, of which €176 billion is cash and the remaining is bonds maturing by 2026.

The EU will first repay 45 billion euros in loans that G7 countries extended to Ukraine last year. The remaining approximately 140 billion euros will be provided to Ukraine as new loans.

What are the risks involved in this plan?

Countries like Belgium are concerned about this plan. They fear that if something goes wrong, the responsibility will fall on Belgium, where the euro is cleared. Therefore, the EU wants all member states to participate in this plan and share the risks. European Commission chief Ursula von der Leyen has stated that the risks of this plan will be shared across countries. All EU countries and the G7 must support this plan to ensure security.

What are the benefits of the scheme?

This plan would benefit Europe by allowing it to use frozen Russian assets to financially support Ukraine. This would provide Ukraine with immediate funds to defend itself and fund post-war redevelopment. It is also being said that countries that helped Ukraine will receive reimbursement after the war if they receive compensation from Russia. This will prevent any major economic losses for European countries.