Russia warns Western banks of ‘catastrophic consequences’ over asset confiscation

MOSCOW (Reuters) -The Kremlin on Friday warned of “catastrophic consequences” should the EU proceed with plans to confiscate Russian assets held in Western banks.

Some Western banks are lobbying against EU proposals to redistribute billions of euros in interest earned on frozen Russian assets, senior industry sources said, fearing it could lead to costly litigation.

European Union leaders on Thursday agreed to move ahead with work on a plan to use up to 3 billion euros ($3.24 billion) a year to supply arms to Ukraine as they try to bolster Kyiv’s fight against Russia, which would still own the underlying frozen assets. EU leaders said the proceeds could be used within a few months.

“We have heard statements from Brussels that the proceeds of our assets don’t belong to anyone,” Kremlin spokesman Dmitry Peskov told reporters. “This is not so. They belong to the holders of the assets, the owners of the assets.”

Responding to Reuters’ report that some banks fear that they might later be held liable by Russia if they are involved in any transfer of money to Ukraine, Peskov issued a thinly veiled warning.

“The legal department of any bank understands the catastrophic consequences of such actions to expropriate assets, both for the bank, for the country as a whole and for the European economy,” Peskov said.

“If such decisions were realised, this would have very serious consequences for those who took and implemented them.”

Central Bank Governor Elvira Nabiullina on Friday weighed in on the issue as well, after the bank had held interest rates at 16%.

“Regarding EU action on frozen assets, decisions will be made and we will take corresponding measures to defend our interests,” Nabiullina said.

($1 = 0.9247 euros)

(Reporting by Dmitry Antonov; Writing by Alexander Marrow; Editing by Mark Trevelyan and Angus MacSwan)