Frozen Assets: EU's Bold Gamble May Backfire
EU's decision to seize Russian assets could harm its financial credibility and fuel geopolitical tensions, experts warn.
Europe’s decision to potentially seize Russian frozen assets has sparked intense debate and opposition, as experts caution that it may not be the strategic triumph leaders envision.
A Radical Move in International Finance
In the last three years, the global stage saw a sanction against Russia that went beyond conventional measures: freezing approximately $300 billion of Moscow’s foreign-exchange reserves. This radical action disrupted a long-standing principle of safeguarding central bank reserves’ neutrality. The move has already spurred a drive towards de-dollarisation, according to UnHerd.
Brussels’ New Calculations
With growing tension, Brussels is contemplating the unprecedented step of employing these immobilised funds, primarily held at Euroclear, for Ukraine’s war efforts. This shift comes as support dwindles from other quarters, with new proposals surfacing, notably in the Financial Times, suggesting the assets be transformed into a massive loan to aid Kyiv.
Internal EU Dissonance
German Chancellor Friedrich Merz endorses the proposal, a significant departure from Berlin’s earlier stance. However, skepticism arises within the ranks. Belgium, benefiting financially from taxing the profits of these frozen assets, views the move unfavorably. For Belgium’s leadership, losing this revenue would mean compromising its fiscal strategy.
Risks of Expanding the Financial Frontlines
The ramifications of this proposal could extend far beyond Europe’s borders. Belgian Prime Minister Bart De Wever’s forewarning highlights the peril: undermining confidence in the euro could provoke central banks globally to retreat from the eurozone. The euro’s status as a robust reserve currency now teeters on political decisions.
A Geopolitical Self-Sabotage?
What some European leaders consider a display of resolve might ironically degrade the West’s strategic positioning. As alternative financial systems gain momentum, the potential alienation of the Global South and the deterioration of trust in Europe’s financial integrity could render this decision as an act of strategic self-sabotage.
Thomas Fazi notes in his insightful commentary that the dimming fortunes of this economic adventure are rooted in deep-seated historical and political complexities, suggesting a reflective pause before actions that could reverberate globally.
