David Cameron's bid for Russian assets: A controversial plan to rebuild Ukraine amid City fears
Cameron believes there are moral and economic arguments for utilising approximately £241 billion of Russian assets kept in Western banks for Ukraine's reconstruction. Just over 10 per cent of this, around £26.4 billion, is in the UK. Cameron has recently deliberated on this idea with his G7 allies.
20 February 2024 13:41
Bankers fear consequences
"i" reports a sense of trepidation among financiers in the City. They fear that London's appropriation of the assets of the Central Bank of Russia could threaten client trust, worrying potential future investors who might fear the risk of seizure of their assets in the UK. This anxiety extends beyond private assets, including state assets and central banks.
A high-ranking director of a global bank based in London revealed to the newspaper that they are prepared to demand legal support if Cameron's plan comes into effect. They express concern that without this, the seized assets could be used to replenish the UK budget rather than to rebuild Ukraine.
Notably, the European Union doubts the viability of plans to confiscate central bank assets due to potential legal issues and the impact this could have on the global financial structure. British ministers expressed similar reservations at the global economic forum in Davos.
Aside from analysing central bank assets, the UK government is exploring a plan to utilise funds frozen in accounts under sanctions to assist in rebuilding Ukraine. The government already has the authority to freeze assets until Russia accounts for the damage inflicted. They can also demand individuals under sanction disclose their assets within the UK.
Conservative party MP Bob Seely, leader of the parliamentary group on Russia, notes that "state assets should be reasonable to acquire," despite the challenges in seizing assets from oligarchs without evidence of legal misconduct. - "I believe that appropriating state assets is the right path. The Russian state assets abroad are significant and sufficient for purchasing weapons and for Ukraine's reconstruction," Seely explained.
Moving towards freezing profits from frozen assets
It is worth noting that last week, the Council of the European Union decided to advance the potential use of profits from Russian assets, now frozen in the West, to contribute towards the reconstruction of Ukraine.
In layman's terms, even though the assets and reserves of the Russian central bank are immobilised, they still generate income (e.g., interest). However, since the Central Bank of Russia cannot manage this, the central securities depositories (CSD) hold the responsibility.
The Council of the European Union has instructed the CSD to keep this revenue from the frozen Russian assets in separate accounts. These will generate further interest. In the future, the EU Council could recognise these profits as a financial contribution to the EU budget to support Ukraine and its reconstruction.
