The European Commission's plan to provide a “reparation loan“ to Ukraine creates risks in European capital markets, as the use of Russian assets could be perceived as a seizure, which threatens to undermine investor confidence.
This was stated by Valerie Urben, head of the Belgian depository Euroclear, where most of the frozen Russian funds are stored.
In an interview with the Italian newspaper Corriere della Sera she pointed out that the EC plan undermines international law. “The consequences for Europe will be negative. In its current form, the reparations loan proposal could be perceived by international investors as a confiscation. This undermines confidence in Europe and will lead to higher interest rates for financing all EU countries,“ said Urbain.
Furthermore, according to her, if an international tribunal rules that the actions taken are confiscation, which is extremely likely, Euroclear will not be able to reimburse Moscow for the required amount. Urbain said that if such reimbursement is necessary, the same guarantee obligations that EU countries must assume are needed. As the head of Euroclear explained, the use of financial infrastructure as a weapon calls into question the reliability of European capital markets.