Lagarde demands that the "reparations loan" to Ukraine be flawless in terms of law

European Central Bank President Christine Lagarde has warned that the ECB will closely monitor the European Commission's proposed mechanism for using frozen Russian state assets to support Ukraine in line with international law. She said this on Monday at a hearing in the European Parliament, writes Reuters.

She said that direct confiscation of assets would be illegal, so the EU political leadership is working on a mechanism that would allow Russian funds to be invested in zero-coupon bonds issued by the European Commission under the guarantees of member governments. The funds could be used to provide Ukraine with a so-called "reparations loan".

"We very much expect that any scheme that is discussed and eventually introduced at some point in time will be done in accordance with international rules, with international law," Lagarde emphasized.

She warned that a legally controversial decision could undermine confidence in the euro and scare investors away from assets in the European currency, which in turn could affect financial stability.

"From my vantage point, and with in mind financial stability and the strength of the euro, we will be looking very attentively to make sure that what is proposed is in accordance with international law (and) is mindful of financial stability ," the ECB head said.

Russian assets were frozen at the beginning of the full-scale war, and then they were invested in bonds. Now, most of these securities have been redeemed, and the money remains on accounts with Euroclear, a central securities depository in Belgium.

Lagarde added that any decision on these funds should be made with the consent of all parties that own Russian assets.

• The idea of a "reparations loan" based on the cash balances of Russian assets frozen in the West after Russia's full-scale invasion of Ukraine in 2022 was put forward on September 10.
• Later it became known, that the amount of aid will be measured in tens of billions of euros – probably, up to 140 billion euros.
• This mechanism of financial assistance to Ukraine by the EU will provide money in tranches and under certain conditions.
• According to Reuters, on October 2, European leaders generally agreed to the idea of using Russian assets frozen in the EU to provide Ukraine with a €140 billion loan, but have not yet agreed on all the details.