France is under pressure to finance Ukraine using €18 billion in Russian sovereign assets, whose location Paris has concealed for over two years. These assets, mostly immobilized in private banks, represent the second-largest accumulation of frozen Russian central bank assets in Europe.
France is under increasing pressure to help fund Ukraine using 18 billion euros of Russian sovereign assets, mostly immobilized in private banks, whose identification Paris has concealed for over two years, reports the Financial Times, writes UNN.
Details
"To the irritation of some other European capitals, France has withheld any details about the institutions holding Russian state funds and how the accrued interest is being used, claiming it is a matter of client confidentiality," the publication writes.
These assets are again under scrutiny as the European Commission implements a plan for a "reparations loan" for Ukraine, backed by sanctioned Russian central bank assets. The latest proposal aims to use funds frozen across the EU, not just the main asset of 185 billion euros in Euroclear, the central securities depository based in Brussels.
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As noted, "assets in France, whose exact location and custodians remain unknown to other capitals, are the second largest accumulation of immobilized Russian central bank assets in Europe." Euroclear was forced to disclose the amount it holds.
"Commercial banks' dealings with central banks and foreign exchange reserves are perhaps the least transparent segment of the global financial market," said Nicolas Véron, a senior fellow at the Bruegel think tank. "Nobody wants to reveal to the world where they put their money."
The European Commission's plan aims to address long-standing objections from Belgium, which wants assets in France and other countries to be part of any loan agreement. Belgium argues that Euroclear has so far been unfairly singled out, making it more vulnerable to Russian retaliation and the financial risks of any loan scheme.
French officials, while supporting the concept of a "reparations loan," have stated that they oppose a scheme that includes assets held in commercial banks, arguing that lenders are subject to different contractual obligations than those in Euroclear.
– the publication states.
After €185 billion in Euroclear, almost all of the remaining €25 billion in Russian state assets are frozen in commercial banks in France and Belgium, according to several people familiar with the matter. Russia's assets in several other EU countries are significantly smaller.
The publication also provides a breakdown by country of where Russian assets are frozen in the EU:
- Belgium – €192 billion;
- France – €18 billion;
- Germany – €200 million;
- Cyprus – less than €100 million;
- Sweden – €10,000;
- Luxembourg – €10,000.
The figures, as indicated, may fluctuate depending on the value of securities and currencies.
"€18 billion of Russian central bank assets in France are mostly held in commercial banks," according to four people familiar with the matter. "Belgium also holds €7 billion in commercial banks," in addition to funds in Euroclear, two people said.
But the names of the banks are kept secret. "This is market-sensitive information – it's like doctors publicly discussing medical records," said European Commission spokesman Olof Gill in a comment.
It is unclear how many banks in France hold these assets, although three people informed about it said they believe the bulk is with the country's largest lender, BNP Paribas. BNP declined to comment.
Crédit Agricole and Société Générale also declined to comment, while BPCE, France's fourth-largest bank, did not respond to a request for comment.
BNP Paribas Fortis, Belgium's largest lender and a subsidiary of the French bank, did not respond to a request for comment. KBC and Belfius declined to comment when asked whether they hold Russian central bank assets, citing confidentiality, the publication writes.
Euroclear has profited from cash generated by blocked Russian central bank assets – mostly through the maturity of securities that Moscow held in Euroclear – but has no contractual obligation to pay Russia interest. The profit generated is considered "unforeseen profit" and is used to support a $50 billion loan to Ukraine, the publication explains.
Private lenders, in contrast, are typically obliged to retain and ultimately pay Russia all or part of the interest arising from cash deposits, the publication writes. But contractual terms vary, and some banks have been able to accumulate interest from holding Russian assets, according to people familiar with these arrangements.
"Central securities depositories did not owe Russia any interest. This is perhaps a significant difference compared to central bank reserves, reserves held by commercial banks, which may have interest liabilities," Gill said.
Under the European Commission's reparations loan plan, the EU will cover any interest payments due from financial institutions to the Russian central bank "in accordance with the terms of the relevant contracts."
Last year, Euroclear's "interest income" from Russian central bank assets amounted to €5.4 billion, and in the first six months of this year, it reached €2.4 billion. According to Euroclear documents, a significant portion of these funds was directed to finance a loan for Ukraine.
As the publication notes, since Euroclear's assets exceed those of the rest of Europe, they have so far dominated EU political discussions. "French banks are followers on this issue, they have no desire to participate in discussions," said one person in Paris familiar with the asset freeze.
The office of the French president in the Élysée Palace declined to comment on assets held by France, as did the French Ministry of Finance, the central bank, and the Ministry of Economy, the publication writes.
Instead, shortly after Russia's invasion of Ukraine in February 2022, the ministry released information about the seizure of yachts and homes belonging to sanctioned oligarchs. It was then stated that about 22 billion euros of funds placed in the Russian central bank had been frozen, and Tracfin, the ministry's financial intelligence unit, reported in detail that a "large French bank" had warned officials that Moscow was trying to repatriate assets.
EU leaders are expected to discuss the reparations loan plan at a summit in two weeks.
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