Ukraine must urgently be given the €300bn of frozen Russian assets
Ukraine needs more than long-range missiles and fibre-optic drones in its fight with Russia. What it needs is more money, and lots of it.
In particular, the war-torn nation should be handed the €300bn (£250bn) of frozen Russian assets stored mostly in accounts hosted by the Euroclear trading system.
The Belgian government could confiscate the funds with the support of the EU Commission, or set up a way to use the Russian funds as collateral for a gigantic loan to Ukraine.
Either way, Moscow has forfeited its right to the money, which is mostly central bank funds that were left behind after Putin gave the order to invade.
As a statement of intent, confiscating the funds would be shock to Putin, hurt his pride and undermine support at home for the war.
It would give Ukraine a much needed psychological boost after months of backpedalling through the Donbas while Russian forces exploit the dithering and equivocation in Washington.
Donald Trump, who views Europe as weak and indecisive, would be left reeling by such a forceful act, which many have demanded since the start of the war and has gained traction in recent weeks as the bombardment of Ukraine has intensified.
A short walk from the EU commission buildings, Euroclear's HQ is one of the largest hosts to international financial transactions in the world. Understandably, it is keen to hang on to its reputation as a cast-iron guarantor of secure trading to the world's biggest investors.
In this role, the company has warned that a confiscation of the €183bn lodged in its systems would undermine Europe's role as a safe haven in the eyes of investors from South America to the Indian subcontinent.
It has the backing of the French and Belgian governments, which are shareholders in the organisation.
Recently another reason for keeping the money frozen and unused has come to the fore. Trump's tariff war and tax-giveaway budget has undermined the US as the home of free-market capitalism, offering the EU a chance to grab a bigger slice of the financial trading action.
One analyst said: 'Europe needs to move quickly to take advantage of growing disillusionment in the US economy'.
Yannis Stournaras, governor of the Bank of Greece, was another to argue that the prize would be toppling the dollar as the premier reserve currency and inserting the euro in its place.
A decade ago, many considered the euro a currency with only a limited lifespan before a north/south split – pitching profligate Greece, Italy and Spain against austere Germany, the Netherlands and Austria – tore the single currency apart.
Today the euro is seen as a stable currency while the dollar comes under daily attack. Now is the time to show Europe is the safest of havens in contrast to Trump's America.
There are mutterings in Brussels that to grab this opportunity also means rejecting attempts to confiscate Russia's frozen billions. How would it look, they ask, if the EU invited more investment in the bloc via jointly issued 'stability' bonds, when in the same breath it announced the confiscation of investor funds.
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
This is a fallacy that needs to be squashed quickly. It's true that a few autocratic despots around the world might withdraw their funds from European trading centres if Russia's money is taken away, fearing the same would happen to them, but EU banks should not be looking after their money anyway.
And the Russia situation is extreme and cannot be thought of as the thin end of any wedge, or a slippery slope.
Belgium and the EU have budged a little. The interest generated by Russia's frozen assets is given to Ukraine, and Belgium hands its shareholder dividend payments to the Volodymyr Zelenskyy war effort.
And earlier this month Euroclear said it plans to seize and redistribute about €3bn of Russia's funds after Moscow last year grabbed investor cash of the same value. However, the motive was just to compensate investors who were foolish enough to leave their financial assets inside a country that has been explicitly threatening war since the 2014 invasion of Crimea.
Such manoeuvring only emphasises how Ukraine needs all the money now, as a show of force and as an expression of unity as much for what it could buy.
It matters because, as military chiefs discussed last week in a conference held by the UK's Royal United Services Institute, Putin has the capacity to invade other parts of Europe within months of success in Ukraine. And Nato is under-prepared.
There is broader agreement across Europe as each week passes that Putin needs to be stopped. Military spending is the focus, and governments are promising to ramp up their commitments.
Not by €300bn though, which is why the funds in Euroclear and other EU-based financial custodians must be seized. Even Rishi Sunak, writing in the Economist earlier this year, says he agrees that Russia has kissed goodbye to any rights over the funds. We just need chancellor Merz, president Macron and Keir Starmer to say the same.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sky News
23 minutes ago
- Sky News
Trump-inspired candidate Karol Nawrocki wins Poland's presidential election
Conservative historian Karol Nawrocki, who draws inspiration from Donald Trump, has won Poland's presidential election. Mr Nawrocki secured 50.89% of votes while his opponent, Liberal pro-EU candidate Rafal Trzaskowski, took 49.11%. Earlier, an exit poll called the result the other way around - with both men declaring victory. Mr Nawrocki had positioned himself as a defender of traditional Polish values, aligning himself with US conservatives, including Mr Trump, and showing scepticism towards the EU. Meanwhile, Mr Trzaskowski, 53, had promised to ease abortion restrictions, introduce civil partnerships for LGBT couples and promote constructive ties with European partners. The vote has been closely watched in neighbouring Ukraine as well as in Russia, the European Union and the United States - and the final outcome will decide whether Poland pivots towards more liberal norms or takes a more nationalist path. This vote shows how democratic decisions can come down to slight margins Adam Parsons Europe correspondent @adamparsons The Polish election is not short of interest. The turnout may well be the highest ever for a presidential election and it's been followed keenly around the world. The political views of the candidates are - and apologies for the terrible pun - poles apart. One is desperate for closer ties with Europe, greater reforms domestically and keen to extend the hand of friendship to Ukraine. The other is determined to rein in the Polish prime minister's programme of change, grow closer ties with America and stop Ukraine joining the EU. And there is very little between them. Two exit polls predicted a result too close to call. It's also a good demonstration of how big democratic decisions can come down to slight margins. In a country with more than 28 million voters, this election could be decided by a difference of fewer than 100,000. A final result won't come until Monday - possible into the afternoon. Normally, by that point, we know who's going to win and one candidate has already claimed victory. So far, we don't know the outcome, and both candidates have claimed victory. This one will be tight. Poland's new president will have significant influence over whether the country's centrist government can fulfil its agenda, given the presidential power to veto laws. Poland's new president will have significant influence over whether the country's centrist government can fulfil its agenda, given the presidential power to veto laws. This runoff follows a tightly-contested first round of voting in May, which saw Mr Trzaskowski win just over 31% and Mr Nawrocki nearly 30%, eliminating 11 other candidates.
Reuters
24 minutes ago
- Reuters
Playing it smart: Five questions for the ECB
LONDON, June 2 (Reuters) - The European Central Bank is tipped to cut interest rates on Thursday, its eighth move this cycle, with traders sensing a pause will then follow as the economy holds up better than anticipated and longer-term inflation worries creep back. U.S. tariff uncertainty, heightened further by a court plot twist, makes the backdrop challenging as the ECB weighs any near-term hit to business activity against implications for inflation further out. "The last thing the ECB wants is to be unnecessarily drawn back to a world with limited policy room," said PIMCO portfolio manager Konstantin Veit. Here are five key questions for markets: 1/ What will the ECB do on Thursday? A rate cut will come as no surprise to markets, which price in a quarter point reduction of the deposit rate to 2% as inflation eases and U.S. tariffs cast a shadow over the euro area. The economy is still just limping along and latest surveys point to only lukewarm optimism among firms as services also appear surprisingly weak. "A rate cut is a done deal," said ING's global head of macro Carsten Brzeski. "Even the hawks have not been very outspoken." 2/ And after June? There's a growing consensus that the ECB will pause in July, with one more rate cut anticipated by year-end. ECB chief Christine Lagarde is unlikely to give traders the confirmation they are looking for, stressing data-dependency. In the near-term, inflation could drop further and even undershoot the bank's 2% target, bolstering the case for another cut. But factors including increased government spending and tariffs could exacerbate price pressures in the longer term. ECB board member and policy hawk Isabel Schnabel already favours a pause, saying that tariffs may be disinflationary near-term but pose upside risks further out. Chief economist Philip Lane says the ECB needs to find a "middle path." Swiss Re's head of macro strategy Patrick Saner said the ECB will probably want to reassess over the summer. "We're looking at a cautious easing cycle, not a sprint," Saner added. 3/ What does U.S./EU trade tension means for the ECB? Additional uncertainty. The European Union has won a reprieve from U.S. President Donald Trump's threatened 50% tariffs. But it remains unclear how the bloc will square its push for a mutually beneficial trade deal with U.S. demands for steep concessions. "If tariffs end up to 10-20%, as we expect, I don't think it will be a major issue (for economic growth), and the ECB probably won't react that much," said David Zahn, head of European fixed income at Franklin Templeton, adding that a strong euro should limit inflationary impact by dampening import prices. PIMCO's Veit added that the picture was less clear if a full-blown confrontation prompts aggressive EU retaliation, creating an "inflationary problem" for the ECB. 4/ What will the latest ECB forecasts show? Small downward revisions to 2026 inflation estimates are anticipated as a stronger euro and weaker oil prices pull down inflation. The trade-weighted euro is up around 3.5% so far this year , oil prices have fallen almost 15% . Economists anticipate small downward revisions to the 2025 growth estimates given near-term growth risks caused by tariff uncertainty. Economists polled by Reuters expect 0.9% growth this year, unchanged from the ECB's previous forecast. Goldman Sachs expects the ECB to reduce 2026 projections for headline and core inflation by 0.2 percentage points each to 1.7% and 1.8% respectively, and marginally lower 2025 growth forecasts. Data on Tuesday is expected to show headline inflation eased to 2% in May. 5/ Is the ECB worried about rising long-term borrowing costs globally? Market watchers suspect so, but say Lagarde is likely to stress the bloc's resilience to market turbulence. Weak demand at recent Japanese and U.S. bond sales and Moody's decision to strip the U.S. of its last triple-A credit rating have returned focus to high government debt, a pressure point for bond markets. "Higher long-term yields add a layer of fragility, particularly for highly indebted countries," said Swiss Re's Saner. "While this is certainly not a key reason for easing policy, it's part of the background music."
Telegraph
24 minutes ago
- Telegraph
In markets where the winner takes all, there's only one company worth buying
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Market leadership can be a huge advantage in business. Dominating a market allows a company to outspend its rivals in areas that drive sales, such as marketing and product innovation. Meanwhile, scale can lower the cost of making goods, providing services and distribution. Once businesses establish leadership, they often command significant 'pricing power' because customers have few viable alternative sources of supply – a particularly good characteristic to have with the threat of tariffs looming. The markets that best lend themselves to fostering leaders tend to be niches as they are only big enough to support limited numbers of players, which accelerates the winner-takes-all dynamic. French buildings product and services company Legrand has a keen appreciation of this. It describes itself as 'a giant in profitable niches' and says two thirds of sales come from markets in which it boasts a number one or two leadership position. The pricing power this gives the group was underlined during rampant inflation earlier this decade. Between 2019 and 2023 the group matched cost increases with price rises of 23pc, while managing to achieve annualised sales growth of 9.2pc. Meanwhile, Legrand is confident it can mitigate an expected $150-to-200m tariff hit though price increases coupled with savings and supply chain changes. The company's strong competitive position is reflected in a record of dividend growth every year since its 2006 Paris IPO. British buyers of the shares, which are available through major brokers, need to fill out the correct paperwork to minimise withholding tax and should check for additional dealing costs. Legrand sells digitalisation and electrical products and services to the construction industry. It offers a vast array of products including cabling, lighting, EV charging and datacentre kit, to name a few. It supports its competitive position with solid research and development spending, averaging about 5pc of sales, and boasts a huge network of third-party distributors and installers across 180 countries. Its most important geographies are Europe and the Americas, which account for just over two fifths of sales each. Legrand also taps into long term megatrends – the energy transition is driving demand for electrification and energy-efficiency solution, a housing shortage and aging population in developed economies is benefiting digitisation. Plus, the recent surge in spending on AI has powered a sharp rise in datacentre demand, which the company expects to account for 20-to-25pc of sales this year. Just under half of sales are exposed to what the group defines as its higher growth markets and brokers forecast annualised sales increases for the group as a whole of 6.5pc for the next three years. However, an appetite for acquisitions and plans to spend €5bn on deals between 2025 and 2030 could boost growth further. One of the problems with targeting niche markets is that, by definition, they are not big, which limits growth. Legrand's solution to this is to make many small acquisitions that consolidate its dominance and moves it into attractive adjacent markets. It estimates 60pc of sales in its higher growth operations are acquired. The businesses Legrand buys tend to have lower margins than its own operations, which is unsurprising given the benefits to profitability that leadership and scale brings. However, the group's impressive operating margin of just over 20pc is expected to remain stable in the coming years as Legrand consistently grinds out new savings from recent acquisitions and existing operations. The business model and growth prospects resonate with many of the world's best fund managers, and 11 of these individuals, all identified as among the top-performing 3pc of equity managers globally by financial publisher Citywire, hold shares in Legrand. The high level of smart money interest results in Citywire awarding the company its highest Elite Companies rating of AAA. While leadership in niche markets coupled with strong brand recognition and reputation underpins demand, the company's fortunes are unavoidably linked to the health of the construction industry globally. Currently, the rampant growth from datacentres is offsetting weakness elsewhere, particularly Europe. While management has yet to see any clear signs of a recovery in Europe, it expects a pickup towards the end of 2025. If a recovery can add to the tailwind from the AI boom, there is room for the shares rating to improve based on the current valuation of 21 times forecast next year's earnings, but expectations for ongoing, profitable growth should provide momentum in its own right.
