OREANDA-NEWS  A possible loan to Kiev from frozen Russian assets may be perceived by investors as confiscation and will raise questions about the viability of European capital markets, said Valerie Urbain, head of the Belgian Euroclear depository, where the assets of the Central Bank of Russia frozen in the EU are stored.

"If Euroclear is forced to invest in an interest-free structure where repayment is linked to something over which we have absolutely no control, such as reparations payments from Russia to Ukraine, it will be very similar to confiscation," she said in an interview with the Italian newspaper Corriere della Sera. According to Urbain, if Russia wins in the international court of justice or if sanctions are lifted, Euroclear may not be able to compensate Moscow for losses.

"There is a second problem: Europe has been acting as a guarantor of international law for decades. Should we now start using the infrastructure of financial markets as a weapon? If we do this, investors from non-European countries will begin to doubt the viability of European capital markets. In our opinion, the probability that this will be interpreted as confiscation is high," said the head of the depository.

Belgium, Hungary, Euroclear and the European Central Bank (ECB) strongly opposed the European Commission's proposal to provide Ukraine with a loan for Russian sovereign assets ranging from 135 to 210 billion euros, and France also opposed the use of Russian assets held in commercial banks. But the proposal was still sent for technical approval to the permanent representatives of the EU countries and it will be put to a vote at the European summit in mid-December.