Germany would seize Russian assets to rebuild Ukraine

The Chancellor’s Government Olaf Schölz supports the Ukrainian demand for war reparations, but has not yet taken an official position on the confiscation of Russian state assets. The issue is complex and some sectors of the ruling coalition are more supportive than others, according to people familiar with the talks.

The internal tensions reflect the broader struggle of the international community to forge a common position. If Berlin manages to solve its own problems, it could give fresh impetus to discussions in the European Union and pressure the United States to seize assets, such as central bank reserves, that have been frozen in retaliation for Russia’s invasion.

Foreign Minister Annalena Baerbock wants Russia to pay for the damage caused in Ukraine. The former co-leader of the German Greens, a longtime advocate of a tougher stance with the Kremlin, insists that confiscating at least some of the frozen assets should be an option, officials familiar with the talks told Bloomberg on condition of anonymity. .

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Finance Minister Christian Lindner, who heads the pro-business Free Democrats party, is more cautious. He worries that the seizure of Russian central bank assets could set a dangerous precedent and lead European nations and their allies into a legal deadlock, the officials said.

The EU and the rich country club members of the Group of Seven have frozen some €300 billion ($311 billion) in Russian central bank reserves. The EU has also frozen around €19 billion in assets held by sanctioned Russian businessmen, although these estimates are not complete. The assets are in limbo and currently cannot be distributed.

Rather than a blanket seizure, a more common path in legal terms might be to target the assets of people proven to be involved in Russian war crimes, one of the people said. However, these cases could take years to reach the courts, which could reduce such an initiative to mere symbolism.

The details of the talks show that the possibility of seizing assets is moving from being a theoretical debate to becoming a reality, but there are still important obstacles to overcome. Scholz wants any move to be coordinated with allies and to be legally strict.

“The damage is dramatic, it will cost billions and it will require the entire global community to develop reasonable solutions,” the German chancellor told reporters in August. “It will be a great, great task that has little to do with the Marshall Plan. It will be bigger.

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Similar discussions are happening elsewhere. The EU “will find legal ways” to seize Russian assets to help finance the reconstruction of Ukraine, European Commission President Ursula von der Leyen said, adding that the bloc would seek to create a structure to manage those funds and invest them for the benefit of kyiv.

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During a summit in Brussels last month, EU leaders discussed various options for using frozen Russian assets to support Ukraine, according to conclusions published after the meeting.

EU leaders called on the bloc’s executive arm to come up with a detailed plan, but also stressed that any seizure of assets must be in line with international law. They noted that the prosecution of war crimes is a concern for the international community as a whole, an indication that the EU should seek common ground with the US.

EU officials have said the 27-nation bloc, which formally accepted Ukraine as a candidate for membership in June, will contribute the lion’s share of general financial assistance for Ukraine’s reconstruction. The sum could exceed €500 billion and is likely to trigger a contentious debate on how to raise the money.

In the US, lawmakers in Congress have pressured the Joe Biden Administration to consider seizing some Russian assets by introducing legislation authorizing it in certain cases. Until now, the US administration has resisted these pleas for fear of deterring other foreign central banks from holding assets in the US.