Sanctions that led to the freezing of approximately €200 billion in Russian central bank assets
The freezing of approximately €200 billion in Russian central bank assets came as part of the broad sanctions imposed by the European Union (EU), the United States, and other allied nations in response to Russia's invasion of Ukraine in February 2022.
What was the objective?
The primary aim of these sanctions was to pressure the Russian government by targeting its financial system and reducing its ability to access critical resources for military operations.
Asset Seizure
The EU, along with other G7 nations, froze a large portion of Russia's foreign exchange reserves held overseas, particularly targeting the Russian central bank’s access to assets in foreign financial institutions.
The sanctions also targeted Russian oligarchs, government officials, and their assets. Many of these individuals had significant wealth stored in European banks and properties, which were also subject to asset freezes and other measures.
Russia’s foreign exchange reserves were held in various countries, including Belgium, Luxembourg, and others. A significant portion of this amount was held in Euroclear, Belgium's central securities depository.
Why Euroclear?
Euroclear is a major international financial infrastructure provider that facilitates the settlement of securities transactions, it is one of the world’s largest providers of securities settlement and clearing services. It acts as a central hub for holding and transferring securities such as government bonds, stocks, and other financial instruments. Many of these Russian assets, including Russian sovereign bonds, were held in Euroclear because it serves as a neutral and trusted institution for settling international financial transactions and custodial services for foreign assets.
Russian Central Bank Reserves:
About €200 billion is a portion of Russia's sovereign reserves, which the Russian central bank accumulated over the years through trade, foreign investments, and other means. These reserves were primarily used for stabilizing the Russian economy, maintaining liquidity, and covering external debts.
SWIFT System Exclusion:
Many Russian banks were removed from the SWIFT international payment system, which significantly disrupted Russia's ability to engage in cross-border financial transactions. This exclusion prevented Russian institutions from accessing key financial infrastructure, making it difficult for them to transfer funds abroad.
Discussions on the asset seizure:
The freezing of assets has raised complex legal questions. There are concerns over the legality of confiscating assets that belong to foreign governments, especially when the frozen funds also include those belonging to non-sanctioned entities or individuals.
In Summary:
The €200 billion in Euroclear primarily belongs to the Russian central bank as part of its foreign reserves.
However, within this, there are securities and bonds that may have been purchased by private investors or foreign entities, complicating the process of determining ownership and managing sanctions.
T & G partners have established themselves as one of the few teams capable of effectively solving complex legal problems over more than 20 years of successful legal practice. Our lawyers have Russian and Western legal education, as well as extensive experience in conducting cases in foreign jurisdictions, including the USA, France, UAE, Kuwait and other countries.
We have built and conducted complex legal proceedings together with foreign lawyers, effectively protecting the interests of our clients abroad.
We build cooperation on transparency, trust and step-by-step work. We understand perfectly well how sensitive and complex the situation is related to blocked assets, therefore we see our clients not just as customers, but as partners with whom we work together to achieve the goal.
Unblocking assets in Euroclear: process and requirements
In order to unblock assets blocked in Euroclear due to EU sanctions against National Settlement Depository (NSD), it is necessary to obtain a license from the Belgian Ministry of Finance.
One of the key conditions for issuing this license is the presence of a brokerage account in the EU, since
according to the European regulation, the unblocked assets must remain in the EU.
Terms of obtaining a license
1. An important condition is the presence of a guarantor, who can act as a lawyer, financial institution or broker. The guarantor confirms the facts specified in the application, bears criminal liability for the veracity of the provided data, and after the assets are unblocked, reports to the Belgian regulator. We work with a French lawyer who can act as a guarantor.
2. It is necessary to prove the fact of termination of relations with NSD
3. NSD should not charge a commission in case of unblocking
4. Date of acquisition of assets and filing of a group application
New sanctions requirements
In June 2024, the US and the UK also imposed sanctions on NSD. Now, in addition to the license of the Belgian Ministry of Finance, Euroclear requires a license from the American regulator OFAC. This means that two applications must be submitted:
1. To the Belgian Ministry of Finance
2. To OFAC (USA)
Additionally, a license from the British regulator OFSI may be required if:
• The shares are denominated in British Pounds
• A British depository is involved in the custody chain.
• The investor has a connection to the UK (residence permit or citizenship).
Current application review process:
• A certain practice has already been established for the Belgian regulator.
• There are no precedents or established practice for OFAC yet: the first applications
have been submitted recently, and there are no decisions on them yet.
• Even if the investor has a license from the Belgian Ministry of Finance, without a license
OFAC Euroclear will not unblock assets.
The process of submitting applications and interaction with regulators
To unblock assets, it is necessary to collect a package of documents (see below).
Based on these, two application packages are being prepared:
1. to OFAC
2. to the Belgian Ministry of Finance
The timeframes for reviewing applications are not regulated in either the United States or Belgium.
• The Belgian regulator is currently reviewing the applications that we submitted in March 2024.
• OFAC began reviewing the applications that we submitted for SPB Bank in June 2024.
Execution stage after obtaining licenses
Upon receipt of both licenses (from OFAC and the Belgian Ministry of Finance), the process of transferring
assets begins:
1. An order is submitted to NSD through a Russian broker to transfer assets to the account of a
European broker.
2. NSD transfers the documents to Euroclear, and interaction with the depository begins.
3. After unblocking assets, it is necessary to cooperate with the compliance department of the European broker to avoid additional requirements, such as the need to obtain a license from another regulator (for example, the British OFSI) or other unreasonable conditions.
Cost of services
We offer a flexible approach to payment, as
• Possibility to agree on a fixed amount on an individual basis
• Payment as a percentage after unblocking assets.
Irrespective of the selected option, the investor must cover the costs of the European guarantor (5,000
EUROs) and the costs of translating documents (1,500 EUROs).
List of the required documents:
1. Power of attorney to represent your interests.
2. Copy of the internal Russian passport.
3. Copy of the international passport.
4. Document confirming residence permit in the EU (if any).
5. Real Estate documents in the EU (if any).
6. Certificates confirming children's education in the EU (if any).
7. Notification of opening a brokerage account with a Russian broker.
8. Notification of opening an account with a sanctioned broker (if assets
were transferred).
9. Notification of opening an account with a European brokerage company.
10. Letter from a European brokerage company on readiness to accept assets.
11. Inter-depository account agreement between NSD and a Russian broker.
12. Letter from NSD on the absence of a commission for the transfer of assets.
13. Agreement between NSD and a broker on termination of the inter-depository agreement.
14. Certificate from a Russian broker on the structure of asset storage.
15. Statement on the Depot account and broker's report.
16. Statements and reports from the broker on assets, if they were transferred between
sanctioned brokers.
17. Confirmation of filing a group application with the Belgian Treasury (date of
submission, registration number).
