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12 Apr, 2024 10:03

US floats softer alternative to confiscating Moscow’s reserves – FT

The West should borrow against the future profits earned by frozen Russian central bank assets, a senior official has reportedly urged
US floats softer alternative to confiscating Moscow’s reserves – FT

The US wants to use future profits from seized Russian assets to raise debt on behalf of Ukraine, a senior White House official has said, according to the Financial Times. European allies have resisted Washington’s initial plan to simply confiscate Moscow’s frozen funds.

Western nations have blocked some $300 billion of Russian sovereign assets, most of them in the Belgium-based central securities depository Euroclear. The US government has advocated for the money to be expropriated and given to Ukraine – a step that Russia has said would amount to theft. Officials in the EU are concerned about the legality of the proposed move, as well as its potentially devastating effect on the Western financial system.

European nations are considering whether to take profits from frozen Russian assets and use them to fund weapons and reconstruction projects for Ukraine. However, the same proceeds could be better used as collateral for loans, US Deputy National Security Adviser for International Economics Daleep Singh reportedly argued during a visit to Kiev on Wednesday.

“Instead of just transferring the yearly profits from the reserves… it’s conceptually possible to transfer the ten years of profits or 30 years of profits,” the official said, as quoted by the FT. “The present value of those profits adds up to a very large number.”

Leveraging future profits to receive credit now would allow the West to “supersize the value of these income flows over time,” Singh claimed.

A European official told the newspaper that based on an expected revenue of €50 billion to €60 billion ($53 billion-$64 billion), a bond could generate up to €40 billion today, but warned that this was heavily dependent on future interest rates.

Creditors would also likely have concerns that the Ukraine conflict would be resolved within several years in a deal entailing the return of Russian assets, the report added. State guarantees may address that, but such loan terms could be challenged in some Western jurisdictions, the FT said.

The US has insisted that Moscow’s funds will not be returned until Kiev is satisfied. “Russia must pay for the damage it has caused in Ukraine. And it is not for Russia to decide if or when that happens,” Singh said during his trip to Kiev.

Moscow has warned that it will retaliate if its assets are confiscated by the West.