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Euroclear earned €4.4bn last year from Russian assets immobilised at the central securities depository by EU sanctions, as the bloc gears up to seize the extraordinary profits to support Ukraine in its war against Russia.
The Brussels-based group disclosed on Thursday that earnings related to interests from Russian assets more than quadrupled from €821mn in 2022 due to rising interest rates.
Euroclear’s overall net interest earnings jumped to €5.5bn in 2023 from €1.17bn in 2022, according to its yearly results, with the bulk of it related to Russian assets.
Euroclear has been holding about €191bn belonging to Russia’s central bank, the majority of €260bn in sovereign Russian assets immobilised by western sanctions implemented following Moscow’s full-scale invasion of Ukraine in February 2022.
The settlement house has accumulated extraordinary income due to the sanctions as it has not been able to pay out cash balances to the Russian central bank and other sanctioned clients, such as coupon payments and redemptions.
European officials have been eyeing ways of using the proceeds that Euroclear has made by reinvesting the stuck cash balances to support Ukraine.
EU countries on Monday unanimously approved new rules that will pave the way for such a step, making it mandatory to set aside the extraordinary profits, which Euroclear has already been doing.
But the legislation will not apply retroactively to the proceeds from 2023, and only to those accumulated once the new rules come into force in the coming weeks. This means that Euroclear’s 2023 proceeds of €4.4bn will probably not be set aside for Ukraine.
Euroclear already paid €1.08bn in regular corporate tax to Belgium in 2023, with the money going towards measures supporting Ukrainians, according to the Belgian government.
The European Commission is preparing further legislation to actually seize the profits that will be set aside, and then transfer them to a fund for Ukraine.
The debate around using Russia’s immobilised assets, and the windfall profits Euroclear is making by holding them, has been fraught because of technical and legal difficulties.
“Euroclear is focused on minimising potential legal and operational risks that may arise for itself and its clients from the implementation of any proposals from the European Commission,” Euroclear said in its report.
The German government has said it believes seizing the windfall profits at Euroclear is the correct approach, while the general seizure of the principal assets could have significant consequences for the euro.
The US has pushed for the full seizure of Russia’s sovereign assets, rather than only the resulting profits at Euroclear, which several partners in the G7 view sceptically.
Countries such as Germany and France as well as the European Central Bank have warned of potential risks to the financial system, fearing that such a move could lead to other central banks withdrawing their assets in euros.
Euroclear said it was already facing a “significant number of legal proceedings ongoing, almost exclusively in Russian courts” over the immobilised assets, adding that the probability of “unfavourable rulings” was high.
