Seizing almost €200-billion in Russian state assets at Euroclear could trigger ugly repercussions

Globe and Mail

16-05-2025

Financial services companies flourish when they build trust among investors and clients; they die a slow (or sometimes even quick) death when they do not. When confidence evaporates in a bank, for instance, a run on deposits can shatter the business virtually overnight.
One of the biggest financial services players, Euroclear, has the confidence of not just its home country, Belgium, but the whole world. Or at least did. One client in particular – the Russian state – is seething mad. Moscow fears that the €195-billion ($305-billion) of sanctioned assets held in custody at Euroclear are vulnerable to 'theft,' as Western governments come under pressure to seize the funds to pay for Ukraine's reconstruction when the war ends.
That scenario could unfold, opening a Pandora's Box of lawsuits that could damage Euroclear, make a mockery of its mission to 'safekeep your investments' and possibly destabilize the European economy and beyond. In March, Belgian Prime Minister Bart De Wever told reporters that confiscating the Russian assets would amount to 'an act of war' that would ensure massive retaliation by the Kremlin and pose 'systemic risk to the entire financial world system.'
He may be right. So beware what you ask for, Western leaders.
Euroclear calls itself a financial markets 'infrastructure' company. In simple terms, that means it is a depository of securities – the world's biggest, in fact – and provides transaction settlements for everything from bonds and equities to funds and derivatives. At last count, it held €41-trillion in assets – equivalent to more than a third of global GDP – had 2,400 clients and handled some 300 million transactions a year. On Wednesday, it reported record first-quarter business income of €466-million, up 10 per cent over the same quarter a year earlier, and a net profit of €283-million.
Russian foreign reserves began to funnel into Euroclear in 2012. Its central bank lost control of many assets it stashed at Euroclear and other depositories after Russia's invasion of Ukraine in early 2022 triggered a barrage of sanctions. About €300-billion was immobilized in Western countries, almost two-thirds of which is held by Euroclear.
While the Russian assets themselves remain frozen, for the moment anyway, the profits made on them are not. Under European Union law, those profits are siphoned off and used to help Ukraine. In the first three months of this year alone, the interest on the cash balances of the sanctioned Russian assets came to €1.5-billion. In 2024 alone, Euroclear delivered €3.5-billion of the 'windfall' profits to the European Fund for Ukraine (The World Bank earlier this year estimated that Ukraine will need €506-billion over a decade to piece itself back together).
Next up might be the underlying assets themselves. If those assets are seized and handed to Ukraine, the consequences could be ugly.
The EU's most senior diplomat, Kaja Kallas, supports using the assets, as do the foreign ministers of Poland and Lithuania. Britain and Sweden are in broadly in favour. French lawmakers have backed a non-binding resolution calling for the EU to seize the assets. But Germany, Italy and Belgium oppose the idea.
The idea of seizing foreign sovereign assets is enveloped in grey legal mist. Those assets are probably immune from both international- and domestic-law jurisdictions unless such seizures are labelled countermeasures – that is, made in response to breach of international law by Russia itself. But some law professors think a government decree or a new EU regulation might allow seizures to happen.
Euroclear itself is terrified of the scenario. 'We cannot end up in a situation where assets are confiscated and then a few years later Russia comes and demands them back, when the assets are no longer there,' Euroclear chief executive officer Valerie Urbain said in a Bloomberg interview last year. 'If assets are confiscated, then liabilities must also be transferred.'
The legally dubious nature of seizing the assets is one big risk. There are others. The Russian state could wallop Euroclear with lawsuits; already, the owners of the €70-billion in private Russian assets held by the company are suing for compensation. In its earnings statement, Euroclear said 'the probability of unfavourable rulings in Russian courts is high since Russia does not recognize the international sanctions.'
The seizure of the assets could trigger a wave of withdrawals – a bank run, in effect – that could cripple Euroclear. The precedent of nabbing sovereign assets could encourage raids on the assets of other countries that misbehave in some way, like launching wars of aggression or being found guilty of serial human rights abuses. Should Israeli assets be seized because its total blockade of Gaza since March has left hundreds of thousands of Palestinians 'at critical risk of famine,' as UN-backed food security experts said earlier this month?
Mr. De Wever, the Belgian Prime Minister, knows that any seizure of the Russian assets could push Euroclear, Belgium itself and the international financial markets into the house of pain. 'We're not living in a world of fantasy,' he said. 'We're in the real world, where if you take €200-billion from somebody, there will be consequences.'