Thanks to the Russian Central Bank’s foreign exchange reserves frozen in deposits around EU countries, the European Union could earn an average of 3 billion euros per year. But for now, the big names in the financial industry are making huge collections thanks to the sanctions imposed on Moscow as punishment for the invasion of Ukraine. It’s a paradox that Brussels wants to put an end to imposing taxes on extra profits, a bit like what it did to companies that grew their earnings thanks to the energy crisis.
The proposal has been on the table for months, but multiple member states apparently thwarted the Commission’s ambition to seize Russian assets blocked in Europe (a measure proposed by Ukraine but considered to violate international law). By expert lawyers in Brussels), on the interest these reserves generate by staying in accounts (or rather reinvesting).
The exact size of this stack is unclear. According to an estimate confirmed by official documents and authoritative media such as the Financial Times, there will be 280 billion euros in frozen Russian reserves in the G7 and EU countries. At least two-thirds of them are in the EU. Of course, Euroclear, one of the world’s leading central securities depositories, if not the largest, has $180 billion held in Belgium.
In the first quarter of 2023 alone, the company recorded interest income of 734 million euros, thanks to the frozen funds of the Russian Central Bank, Euroclear told it. Euroclear’s shareholders include banks and insurance companies, as well as the Belgian state, which has promised to transfer its share of interest income (approximately 600 million, according to government estimates) to Ukraine.
However, the Commission wants to impose some form of tax on these earnings. Investing the Russian Central Bank’s frozen funds in relatively short-term “high-rate and liquid assets” could yield returns of up to 3.6, according to a calculation by the working group set up to evaluate the management of Russian assets frozen by the EU. billion euros of collection per year (assuming these funds are blocked for two to three years). A contention that could be even greater if the same method were applied to all assets frozen by sanctions against Russia, such as those held by Clearstream, a Luxembourg company controlled by German Deutsche boerse.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
