Some Western banks are lobbying against an EU plan to use profits made by Russian central bank funds that are frozen in Europe to arm Ukraine, Reuters reported.
The European Commission has proposed sending up to 3 billion euros to Ukraine per year using the revenue. About 90% would go to a fund called the "European Peace Facility" that can be used to buy weapons for Ukraine, and the remaining funds would go to the EU’s central budget for other types of aid.
Russia has slammed the plan and has vowed to respond. "This is outright banditry and theft. These actions are a gross and unprecedented violation of basic international norms. We said that we would respond, and so we shall," Russian Foreign Ministry spokeswoman Maria Zakharova said on Wednesday.
Sources told Reuters that banks fear they could be held liable by Russia in the future for being involved in the transaction. The report said once sanctions on Russia are eased or lifted, they could face decades of legal action.
The banks also worry the move would erode trust in the Western banking system. One source said it would set a bad precedent and that stealing the funds would amount to the "weaponization of foreign-held reserves and assets."
Another banking industry source was cited as follows:
A second person said their bank was seeking legal advice on indemnities it could demand to participate in the EU's plan.
"If these proposals move forward, the whole legal architecture would need to change," said Paul Feldberg, partner and head of Brown Rudnick's White Collar Defense, Investigations & Compliance practice in London.
Another sources said: "There isn't an immediately obvious way for banks to insulate themselves comprehensively from future challenges and clawback actions."
The US is looking to take an even more extreme measure by giving all of the Russian funds to Ukraine, not just the profit and interest. Last month, Treasury Secretary Janet Yellen came out strongly in favor of the idea. "It is necessary and urgent for our coalition to find a way to unlock the value of these immobilized assets to support Ukraine’s continued resistance and long-term reconstruction," Yellen said.
Legislation to give the Russian money to Ukraine has been introduced in Congress and has received bipartisan support, but the bills have yet to be voted on. About $67 billion in Russian central bank funds are held in the US, while over $200 billion is held in Europe.
