German Chancellor Olaf Scholz was reportedly “exasperated” by Polish President Andrzej Duda at a meeting of EU leaders in Brussels on Wednesday night, when the latter proposed using frozen Russian assets to fund Ukraine, a move that Berlin has long opposed, the Financial Times has claimed.
According to the FT, Duda suggested confiscating the frozen Russian assets outright, should US President-elect Donald Trump choose to slash Washington’s contribution to Kiev's war chest.
The British newspaper, citing “three people briefed on the discussions,” reported that Scholz “became irate” and sharply rebuked Duda over his proposal. The German chancellor reportedly said “You don’t understand how this would affect the stability of our financial markets,” raising his voice and startling those present.
While countries like the US, UK, and Ukraine itself have backed outright confisaction of Russia's sovereign assets, key EU nations, including Germany, France, and Italy, have raised concerns that doing so could undermine the stability of the euro.
Scholz reportedly further pointed out that Poland continues to use the zloty, adding, “You don’t even use the euro!”
The US and EU have immobilized around $300 billion-worth of Russian assets as part of sanctions. The bulk of the funds, around $213 billion (€197 billion), is being held at the Brussels-based clearinghouse Euroclear.
Last week, the EU’s top diplomat, the newly-appointed Kaja Kallas, told Politico that the bloc should use the frozen Russian assets to reconstruct Ukraine before handing back whatever remains. The former Estonian prime minister added that she doubted there would be “anything left over.”
Euroclear announced earlier that in July it made a first payment of about $1.6 billion (€1.55 billion) to the European Fund for Ukraine, taken from the interest generated by the frozen Russian assets.
In June, the G7 countries also agreed to provide Kiev with a $50 billion aid package financed by revenues from the immobilized funds.
Talking to Bloomberg earlier this month, Euroclear CEO Valerie Urbain warned that the outright appropriation of the frozen Russian reserves could threaten the euro’s role as a reserve currency and pose risks to the broader stability of the bloc’s finances. Her predecessor, Christine Lagarde, has previously made similar assessments.
Moscow has repeatedly accused the West of “stealing” its money and warned that tapping these funds would be illegal, and would set a dangerous precedent.
Last month, Russian Finance Minister Anton Siluanov said that Moscow would respond in kind. “We have also frozen the resources of Western investors, Western financial market participants and companies. The income from these assets will also be used,” the official clarified.
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