Germany resists EU plan to freeze Russia's assets- FT
Marco Buschmann, Germany’s justice minister. Photo via EPA

Germany has objected to the European commission’s plan to use frozen Russian central bank assets to fund Ukraine reconstruction, the Financial Times reported on Monday, citing sources.

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Senior German government officials fear that the legal risks are too high for the plan to win enough support.

While Berlin agrees that Moscow "will have to pay for the damage it has caused in Ukraine", the idea of using Russian funds for Ukraine’s reconstruction raised "complex financial and legal questions", a German foreign ministry official said.

"It opens a can of worms," another German official said, adding that if the EU took money from the Russian central bank or reaped the proceeds from investing the funds, it would set a precedent for others to pursue, such as Poland’s reparation claims against Berlin for damage during the Second World War.

Marco Buschmann, Germany’s justice minister, believes the EU proposals for harvesting the Russian central bank assets are "legally unworkable", per the FT.

At a meeting with the EU commission last week, several diplomats urged caution, saying important questions needed to be answered before a formal proposal was made.

EU officials have backed away from the idea of confiscating the Russian central bank assets outright, and are instead looking for ways to harvest some of the proceeds for Kyiv.

One option is for securities depositories to be required to make a windfall contribution from the profits generated when they reinvest the proceeds of immobilised Russian assets.  The Ukrainian government expects it could raise EUR 3 billion a year.

Kyiv is also considering an alternative scheme whereby the European commission could use confiscated Russian assets as collateral against which to attract investment.

Ukraine has long been calling for an estimated USD 300 billion frozen Russian assets to be confiscated and allocated for reconstruction purposes. Most Western partners are, however, reluctant to do so, citing legal obstacles relating to confiscation of private property.

Some countries, still, have adopted makeshift mechanisms allowing for confiscating some Russian sanctions-related assets as part of criminal proceedings.