$300 Billion 'Russian Frozen Assets' Discussed for Ukraine Support... Euro Shaken

Central Banks' Euro Assets Decrease by 100 Billion
"Tensions with Russia May Affect the Euro"

At the Group of Seven (G7) summit, where the use of frozen Russian assets to support Ukraine is set to be discussed, concerns have been raised that such measures could weaken the status of the euro.

On the 12th (local time), according to major foreign media, the European Central Bank (ECB) released a report revealing that euro-denominated assets in central banks' reserves worldwide decreased by about 100 billion euros (approximately 147.976 trillion KRW) last year.

As a result, the share of the euro in global foreign exchange reserves fell to 20%, marking the lowest level in the past three years.

Foreign media analyzed that the plan to use frozen Russian assets to support Ukraine has raised concerns that it could undermine the attractiveness of the euro, which contributed to the decline in the euro's share of global foreign currency reserves last year.

The ECB stated, "Sanctions-related measures may be related to the future share of the euro in global foreign exchange reserves," noting that tensions with Russia could impact the euro.

Russia holds about 40% of its official foreign exchange assets in euros, an unusually high proportion. According to the ECB, this accounts for approximately 8% of global foreign currency reserves. Since Russia's invasion of Ukraine, about 300 billion dollars (approximately 410.55 trillion KRW) of Russian foreign exchange reserves have been frozen. Most of these frozen Russian reserves are in euros.

The G7 summit will be held from the 13th to the 15th in Puglia, southeastern Italy. The United States has proposed to the G7 and the EU to create a loan program worth 50 billion dollars secured by the interest on the frozen assets of the Russian central bank. This agenda is expected to be a major topic at the G7 summit.

On the previous day, John Kirby, White House National Security Communications Coordinator, stated at a G7 summit briefing, "We will announce new measures to ensure that Ukraine benefits from the frozen Russian state assets and recovers from the damage caused by Russia."

So far, the ECB has warned that the full seizure of frozen Russian assets could negatively affect the international status of the euro. Fabio Panetta, Governor of the Bank of Italy, said earlier this year that weaponizing the euro could damage its appeal.

Additionally, as central banks worldwide shift their strategies to hold more of other currencies such as the Chinese yuan, Australian dollar, and Korean won, the euro's share in global foreign exchange reserves has declined. Some countries, including China, Russia, and Iran, are seeking alternatives by using their own currencies more in international trade.

Christine Lagarde, President of the ECB, said in the report, "So far, the data does not show evidence of significant changes in the use of international currencies, but we must remain vigilant to see if cracks begin to appear." She added, "In some countries, units other than major payment currencies are being used for international trade, and alternatives to traditional inter-country payment systems are being explored. In countries closely linked to Russia, the accumulation of gold as reserve assets has continued," emphasizing that "overall, the international monetary status of the euro should not be taken for granted."

This content was produced with the assistance of AI translation services.