Euroclear earns €3bn from Russian assets frozen by west

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Euroclear has earned just over €3bn so far this year from Russian assets frozen at the securities depository by EU sanctions, in a windfall that is likely to crank up the pressure on European leaders to channel the profits to Ukraine.

The Belgium-based group said on Thursday that income related to trapped Russian assets jumped in the first nine months of the year from €347mn in the same period in 2022, propelled by rising interest rates.

The sharp rise is uncomfortable for Euroclear, which has been sitting on Russian assets since Russian president Vladimir Putin ordered the full-scale invasion of Ukraine, because the EU’s subsequent sanctions on Moscow mean it cannot move funds to Russian banks. Millions of securities deals a day are tracked and settled at the Brussels-based group.

About €197bn Russian assets are stuck at Euroclear, according to the Belgian government. Of that total, €180bn are from the Russian central bank, the lion’s share of the $300bn of central bank assets frozen by western sanctions.

EU officials have been grappling with how best to deploy the proceeds from Russian assets that are stuck in Europe’s financial system. It is considering using the windfall profits Euroclear makes for Ukraine, with EU leaders due to discuss the plans later on Thursday.

A draft statement of the leaders, seen by the Financial Times, urges the European Commission “to accelerate work with a view to submitting proposals” regarding the use of the “extraordinary revenues” stemming from the frozen Russian assets for Ukraine.

Some member states such as Germany have expressed scepticism of the plans, and the European Central Bank has cautioned against seizing the profits racked up at Euroclear over potential risks to the euro, warning that it could induce other central banks holding euro-denominated assets to abandon them and weaken the currency.

EU officials say they will only take steps to leverage the assets as part of a global initiative with the support of other central banks and governments, particularly Washington.

“Euroclear is focused on minimising potential legal, technical, and operational risks that may arise for itself and its clients from the implementation of any proposals from the European Commission,” it said in a statement.

US and European sanctions on Russian companies and individuals have left their coupon payments and bond redemptions frozen at Euroclear. Regulations mandate the Belgian group reinvests the money and rising interest rates are providing a growing windfall for the settlement house. In the first nine months of last year Euroclear had earned €347mn from the Russian assets it holds.

High interest rates pushed net interest earnings at Euroclear above €3.8bn for nine months to September, up from €522mn in 2022. The bulk was related to Russia sanctions.

Belgium is already setting aside the corporate tax it earns on the unusual profits at Euroclear for Ukraine, the government has said. Euroclear has this year paid €740mn in taxes on the earnings from immobilised Russian assets up to September, according to its financial statement.

While the EU seeks to spend the profits, Euroclear is facing lawsuits from Russia to force it to hand over the money. The company said it spent €34mn in the first nine months of the year managing the implications of the Russian assets and legal costs, a jump from €12mn compared with the same period last year.