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17 Feb, 2024 10:19

West could upend global financial system – Russian central bank

The seizure of the country’s reserves would jeopardize the “immunity” of national assets worldwide, Elvira Nabiullina warns
West could upend global financial system – Russian central bank

The global financial system would be disrupted if Brussels and Washington go through with threats to use Russian sovereign assets to help Ukraine, the head of the Bank of Russia, Elvira Nabiullina, warned on Friday.

Nabiullina noted that the principle of protecting the reserves of national central banks is a fixture in international law.

“This immunity ensures the stability of the international financial system. Deviation from this principle, in our opinion, would lead to upending, albeit gradually, the system of international finance and the position of reserve currencies in the world,” she said at a press briefing, referring to the dollar and the euro.

The official also noted that countries with which Russia maintains financial and trade relations “are showing growing interest in diversifying assets,” which, according to Nabiullina, is “an absolutely natural reaction to risks such as confiscation of reserve assets.”

The US and EU have frozen around half of the assets belonging to the Russian central bank, an estimated $300 billion, since the beginning of the Ukraine conflict in 2022. Western states have since been mulling ways to confiscate these assets in order to fund aid packages for Kiev. Roughly two-thirds of the funds are being held by the Belgium-based clearing house Euroclear, which last year accumulated nearly €4.4 billion in interest on the funds. Brussels is currently working on ways to seize the interest income, while Washington continues to push for confiscation of the assets.

Moscow has condemned the freezing of its assets and warned of tit-for-tat measures if the West moves to seize them.

Earlier this week, the head of Euroclear, Lieve Mostrey, also warned that tapping the funds or any income made from them would jeopardize the credibility of the clearing house.

“When we come to a logic of seizing of assets... then you see the trust in the Euroclear system, the trust in the European capital markets, the trust in euro as a currency substantially affected,” she said in an interview with the Financial Times.

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