Germany is objecting to EU plans to tap the frozen assets of the Central Bank of Russia (CBR) to finance Ukraine reconstruction, the Financial Times reported citing unnamed senior German government officials and diplomats.

As followed by bne IntelliNews, the efforts to estimate and locate the exact volume of sanctioned and frozen assets are being accompanied by ongoing discussions on mechanisms for forcing Russia to compensate for the damages to war-torn Ukraine. 

Previous reports suggested that the EU sees “no credible legal avenue allowing for the confiscation of frozen or immobilised assets on the sole basis of these assets being under EU restrictive measures.” Instead, it was proposed to channel windfall profits from the investments to Ukraine, i.e. investing the funds that are blocked and using the returns.

But senior German government officials now say they doubt the plan would win enough support because the legal risks are too high, according to the Financial Times.

An unnamed foreign ministry official said the idea of using Russian funds for Ukraine’s reconstruction raised “complex financial and legal questions”, even if he insisted that Germany was doing “everything it legally can” to locate and freeze the assets of sanctions-hit Russian individuals and companies. 

“It opens a can of worms,” another German official told the Financial Times, warning of precedents for others to pursue, such as Poland’s reparation claims against Berlin for damage during the Second World War.

Another official said Marco Buschmann, Germany’s justice minister, had studied the EU proposals for harvesting the Russian central bank assets and concluded they were “legally unworkable”, as cited by the Financial Times.

This month the Financial Times also reported that the European Central Bank (ECB) officials privately told the European Commission that plans to divert payments on bonds owned by the CBR would send a bad signal to global markets.