Confiscating Russia’s assets would send negative signal, says central bank

MOSCOW (Reuters) – The potential confiscation of Russian assets by Western governments would send a strongly negative signal to other central banks and would gradually undermine international finance, Russia’s Central Bank Governor Elvira Nabiullina said.

The European Union on Monday adopted a law to set aside windfall profits made on frozen Russian central bank assets, in a first concrete step towards the bloc’s aim of using the money to finance the reconstruction of Ukraine following the war.

Russia’s foreign ministry warned the West that it would take a very tough response, describing the plan as “theft” and “appropriation”. Nabiullina, in a more measured response on Friday, said the central bank would take steps to protect its legitimate interests.

Nabiullina was speaking after the Bank of Russia held its key interest rate at 16%, opting to leave borrowing costs unchanged after five successive rate hikes since last summer, due to stubborn inflation pressures.

“Essentially, (confiscation) is a breach of the basic principles of central bank reserve protection,” Nabiullina said. “In international law, this is one of the key, basic principles of immunity of central bank assets from coercive measures of seizure.

“In our view, deviation from this principle, will lead to the, albeit gradual, undermining of the system of international finance and the position of reserve currencies in the world.”

(Reporting by Elena Fabrichnaya, Vladimir Soldatkin and Alexander Marrow; editing by Jason Neely and Sharon Singleton)