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EU political agreement to tackle the Russian Central Bank

The EU has the political green light to launch its offensive against the Russian Central Bank. European foreign ministers agreed on Sunday, in agreement with the G7 powers, to block the transactions of this institution, announced the head of EU diplomacy Josep Borrell.

This agreement paves the way for the implementation of the measure by the opening of the markets on Monday, he indicated, estimating that “more than half of the reserves” of the Central Bank, placed in establishments banks of G7 countries would be paralyzed.

Reserves of around $460 billion

The members of the G7 and the EU agreed on Saturday to block the operations of the Russian Central Bank on their soil, which amounts to drastically restricting its ability to convert its foreign exchange reserves. The objective is to prevent Moscow from using it to finance the conflict in Ukraine and counter the impact of Western sanctions on the Russian economy. The Central Bank’s reserves, which notably include assets in dollars, euros and yuan, but also gold reserves, amount to around 460 billion dollars according to the financial agency Bloomberg.

After the agreement of the European ministers, the proposal must “be formally adopted by a written procedure to which the Member States will have to respond by 4 a.m., in order to prevent the Central Bank, when it reopens on Monday, from accessing to its reserves located in the markets in the EU, the United Kingdom and the United States”, explained a European source.

Russia “prepared” for these sanctions

“We cannot block Central Bank reserves located in Moscow or China. Over the past year, Russia (…) has prepared for the current situation by reducing its reserves in dollars” to increase those in yuan, rubles and gold, however, specified Josep Borrell.

On the other hand, the Ministers of the Twenty-Seven have not yet reached an agreement to exclude Russian financial institutions from the international Swift interbank messaging system. The European Commission had indicated on Saturday that it would propose to member states to block the access of “a certain number of banks” to Swift, but states are worried about the impact of the measure. According to a European source, the Commission is still in discussions with London and Washington to identify the Russian banks that would be targeted, and proposals should be finalized on Monday.

Source: 20minutes

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