Geoffrey Smith 

Investing.com — The European Union should seize Russia’s foreign exchange reserves to pay for the reconstruction of Ukraine, the EU’s top diplomat said in an interview published on Monday.

“I would be very much in favour because it is full of logic,” Josep Borrell, the EU’s High Representative for Foreign Policy, told the Financial Times.

Russia is home to more than a quarter its foreign reserves in Germany France and Austria. Around another quarter is held by G7 members – the U.S., U.K., and Japan.

Seizing reserves would face significant legal hurdles, and would risk undermining global trust in an international financial system that has run for decades on the assumption that reserves – essential for the smooth processing of global trade – were essentially inviolate, however bad relations between countries became.

If the Russian troops are withdrawn, however, there is little else that could be done to help Ukraine rebuild. In addition, there is precedent for such a step, when the U.S. set aside $3.5 billion of Afghanistan’s dollar reserves to pay compensation to the victims of the 9/11 attacks in 2001. Al Qaeda’s leader Osama bin Laden had planned the attacks from Afghanistan.

Borrell’s warning was published on the 77th anniversary of the end of World War 2. Russian President Vladimir Putin is expected to deliver a carefully-recorded speech in Moscow at the celebrations marking this occasion. It may be a signal about Russia’s desire to keep the war in Ukraine going that began 70 days ago.