Estonia holds tens of millions of euros worth of Russian assets under sanctions. Estonia and the EU are discussing whether frozen Russian assets could be used for the good of Ukraine.
Over 90 percent of assets frozen in Estonia are tied to two Russian oligarchs –Andrei Melnichenko and Vyacheslav Kantor. The former owns Eurochem in Sillamäe and the latter DBT in Muuga. A network of affiliated companies branches out from the two. Laura Aus, head of the Money Laundering Data Bureau's international sanctions and anti-terrorism funding arm, said that it is almost impossible to calculate the exact value of frozen assets.
"Assets frozen in credit and other financial institutions, bank accounts come to around €11.7 million. Assets kept in the Tax and Customs Board's prepayment accounts amount to approximately €8.4 million."
The sum is constantly changing. For example, companies can spend frozen assets to pay for safe storage of frozen property, such as chemicals. It is even harder to calculate the total value of frozen property, tangible things, Aus suggested.
"Talking about companies, there is the question of whether to count all fixed assets, with various marginal calculations cropping up. For example, what is the value of a deer in one case in Lithuania."
It is only possible to conclude that the total value of frozen property is greater than what is in bank accounts. The Tax and Customs Board has carried out over 35,000 checks when enforcing sanctions and found violations in 1,300 cases. Most have been rather ordinary, head of the agency's customs department Eerik Heldna said.
"For example, people arrive at the border with a considerable amount of cash but just under what would have to be declared. Let us say €7,000-8,000. They want to go from Estonia to Russia – taking euro banknotes to Russia is prohibited based on a European Commission decision. In such cases, the person usually understands and returns to the European Union."
We are also seeing plenty of high-end electronics, Heldna added. For example, cell phones with a price tag of more than €750.
"Most are Apple products. We turn those people back too. It all depends on individual products, but we place quite a lot of goods in storage and confiscate others. It happens," Heldna said.
Confiscation awaits goods that are tied to offense proceedings. There have been around ten such cases on the border.
"Cases where goods and assets are placed in storage happen more often. For example, regarding cash sums in excess of €10,000. There are a few such cases every month."
Such assets will be returned to the owner if proved legal when proceedings are concluded. Estonia has also kept fancier things in storage.
"Yachts, for example. Of course, we need to admit that our aquatic area is not as attractive as Mediterranean ports. Nor are the vessels in question in the hundreds of millions price range, though there have been a couple worth over a million. Np planes," Heldna offered.
Customs needs to make sure goods that could be used by the Russian military industry, such as microchips, do not cross the border. More violations are expected as the drought of Western technology in Russia continues.
Heldna emphasized that customs still needs to make sure that permitted goods can cross the border during the sanctions regime.
No decision on whether to use frozen Russian assets
Assets are being frozen everywhere in the world and the West is once again discussing whether some of it could be used as war damages compensation for Ukraine. Professor of international law Lauri Mälksoo said that assets of individuals and those of the Russian state need to be seen separately.
"The Russian Central Bank has around 300 billion euros or dollars in frozen assets abroad. The frozen assets of Russian oligarchs come to around €30 billion."
The World Bank, European Commission and Ukrainian government calculated in September that it would take some €350 billion to rebuild Ukraine. The damage is mounting with every month Russia continues its war. Mälksoo said that whether to use Russian assets is a question of magnitudes.
"Then there is the problem of the principle of state immunity in international law. A foreign court cannot strip a state of assets tied to sovereign administration," Mälksoo said.
Russia's glaring international law violations in Ukraine could provide grounds to go against that principle. However, Mälksoo suggested that practical concerns might prove greater than legal ones.
"In a situation where much of U.S. influence has been based on respecting transactions. Assets have legal protection. If a country has deposited assets in another and then has those assets seized as a result of a political crisis, it could send a signal to other problematic countries that their U.S. assets may not be as secure as they thought. This could result in economic consequences the Americans do not want or even cannot afford."
Therefore, the West needs to decide what kind of a precedent it wants to make. Mälksoo believes that it is unlikely Russian assets will be used in the near term.
"Once real progress starts to be made toward peace talks, central bank assets can be used to apply pressure. Russia could be asked to pay compensation in exchange for the return of those assets. If it refuses, the assets could be kept frozen as a breach of international law has been documented."
Whatever is decided regarding oligarchs' or Russian state assets, Estonia's decision needs to be that of other Member States as it is all part of EU sanctions policy," Heldna explained.
Editor: Marcus Turovski