DNB schuift aan in Tweede Kamer over inzet van bevroren Russische tegoeden

From the outset, let me just stress that policy considerations regarding the use of immobilized Russian assets for the benefit of Ukraine are first and foremost political. DNB as a central bank obviously has neither a mandate nor a position in this matter, nor are we involved in these policy discussions at the EU or global level.

In the same vein, I will also refrain from judging the legal soundness of such a matter. The feasibility of confiscating Russian Central Bank assets under international law is clearly a subject of debate for governments, as natural counterparts in the international legal system, and for legal scholars. The
policy and legal considerations thus squarely lie in the political domain.

Having said that, the risks related to such confiscation go beyond the question of legality. In this regard, I can address possible monetary, financial and economic implications when it comes to policy choices regarding the use of immobilized Russian assets. From this angle, my views are actually quite consistent with the position paper put forward by my esteemed colleague on the screen, Mr Nicolas Véron.

As he rightly argues, it is important to distinguish between the immobilized reserves on the one hand and windfall profits on the other, also in terms of the potential economic consequences. The actual seizure of Russian assets, which, by the way, are primarily located in Europe and owned by the Russian central bank, can have implications for the international role of the euro.

Now why is the status of our currency important? A structurally strong international currency can be desirable from a (geo)political perspective. As the world’s second reserve currency, the euro brings substantial economic dividends to the euro area and is a guarantor of its autonomy. It acts as a shield against external shocks and as a lever for influencing global economic and financial conditions. In this sense, the international appeal of a currency matters.

Three factors play a key role in ensuring the international appeal of a currency: liquidity, reliability and predictability. If one or more of these principles is called into question, economic consequences could arise. It is important that countries and private actors can trust a currency.

A measure such as the confiscation of official assets, which is historically rather unprecedented and legally controversial, could undermine this trust. In the eyes of other jurisdictions, it could affect the reliability and (policy) predictability of the euro. Moreover, the spill-over effects of such a measure are likely to increase if it is backed by a smaller group of jurisdictions – or if the affected assets are actually concentrated within Europe. The international role of the euro is dependent on the relative position of other global currencies, after all. One can draw a parallel with sanctions here: the wider the context and backing of sanctions, the
smaller the impact of such measures on the individual jurisdiction that backs them.

From that perspective, it cannot be ruled out that other regions and jurisdictions at a larger geopolitical distance from Europe will react if the EU would, for example, move from immobilization to actual confiscation of Russian assets. One could think of oil exporting countries in the Middle East or China – countries that typically hold large euro-denominated reserves and accept euro transactions for trade in goods and services.

Public and private actors outside Europe may well start to factor in the risk of similar actions from Europe on the eurodenominated assets they hold should the geopolitical landscape deteriorate. This is simply a reflection of risk management practice where one has to take account of the probability and impact of future financial conditions. In that sense, they may become more hesitant to accept the euro as a transaction currency and store of value, for example in foreign reserve management. It may also affect foreign investments, risk premia on European bonds, transaction costs for European corporates and households, and ease of access to global payment systems.

To finalize my introduction, let me stress that support for Ukraine is pivotal for European security and should continue. How that support is structured is, again, a political consideration. I have merely provided you with some broader economic context on those policy options from a central bank perspective. As holds for all policy decisions, it remains key to have a holistic perspective and consider all relevant trade-offs carefully. Let me stop here for now so we can hear Mr Véron’s views. Thank you.