The European Union should seize Russia’s foreign exchange reserves to pay for the reconstruction of Ukraine, the EU’s top diplomat said in an interview published on Monday.
“I would be very much in favour because it is full of logic,” Josep Borrell, the EU’s High Representative for Foreign Policy, told the Financial Times.
Russia holds over a quarter of its foreign reserves in Germany, France, and Austria. Around another quarter is held by G7 members – the U.S., U.K., and Japan.
Seizing reserves would face significant legal hurdles, and would risk undermining global trust in an international financial system that has run for decades on the assumption that reserves – essential for the smooth processing of global trade – were essentially inviolate, however bad relations between countries became.
However, the bloc faces few more attractive options for rebuilding Ukraine if and when Russian troops withdraw. In addition, there is precedent for such a step, when the U.S. set aside $3.5 billion of Afghanistan’s dollar reserves to pay compensation to the victims of the 9/11 attacks in 2001. The attacks had been planned from Afghan territory by Al Qaeda leader Osama Bin Laden.
Borrell’s warning was published on the 77th anniversary of the end of World War 2. Russian President Vladimir Putin will hold a closely-watched speech in Moscow later at festivities commemorating the event, that may send important signals about how Russia wishes to continue a war in Ukraine that it started 70 days ago.