The EU should seize Russia's currency reserves to fund the rebuilding of Ukraine, the bloc's leading diplomat says

• The EU should consider seizing Russia's frozen assets to pay for the reconstruction of Ukraine, a top diplomat has said.
• Josep Borrell, the EU's security chief, told the Financial Times he's "very much in favor" of such a plan.

The European Union should think about seizing the frozen assets of Russia's central bank to pay for the reconstruction of Ukraine, one of the bloc's leading diplomats has said.

Josep Borrell, the head of the EU's foreign affairs and security policy, told the Financial Times that he would be "very much in favor" of such a plan. He pointed to the example of the US taking possession of Afghanistan's foreign currency reserves.

"We have the money in our pockets, and someone has to explain to me why it is good for the Afghan money and not good for the Russian money," he told the FT in an interview published Monday.

The EU, the US and their allies froze the bulk of the Central Bank of Russia's stockpile of foreign currency in late February, as they slapped tough sanctions on Moscow following the invasion of Ukraine.

The move cut Russia off from around two-thirds of its nearly $630 billion of reserves, according to estimates from OMFIF, a central banking think tank. OMFIF said the the EU is the biggest custodian of Russia's reserves, with France and Germany holding more than 21% between them.

Earlier this year, US President Joe Biden ordered that around half of Afghanistan's central bank reserves, which were frozen when the Taliban toppled the government, be made available as possible compensation for victims of 9/11 and to fund humanitarian support in the country.

Borrell told the FT that he was keen to see the EU discuss ways of making sure that Russia was held accountable for the vast economic damage its invasion of Ukraine has unleashed.

Many emerging market countries were unnerved by the freezing of Russia's reserves, however, which demonstrated the power of the US and its allies over the global financial system. Tensions could rise further if the EU and US tried to take control of those assets.

US Treasury Secretary Janet Yellen did not immediately shoot down the prospect when asked about a seizure in April, but said it would be a "very significant step."

"It's one we would carefully need to think through the consequences of before undertaking it. I wouldn't want to do so lightly," she said at a press conference.

The World Bank estimated in mid-April that Russia's invasion had caused more than $100 billion of damage in Ukraine. It said Ukraine's economy was likely to shrink 45% in 2022, with the International Monetary Fund predicting a 35% contraction.

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