Analysis-Europe faces stark choices over Russian asset seizure

By Mark John

(Reuters) - Growing challenges to the euro's presumption arsenic a reserve currency successful a fast-changing planetary system are, for now, staying the manus of European capitals arsenic they measurement up the repercussions of a imaginable seizure of frozen Russian assets.

Nevertheless, Europe faces an progressively urgent request to assistance bankroll Ukraine's endurance arsenic President Donald Trump looks to propulsion the plug connected U.S. enactment and alternatively bargain with Russia's Vladimir Putin.

That throws a spotlight connected the astir $300 cardinal of Russian cardinal slope assets frozen by the West aft Putin ordered his troops into Ukraine 3 years ago, the bulk of which is held successful Europe - chiefly arsenic authorities bonds, the profits from which are utilized to warrant loans to Ukraine.

While seizing those assets outright whitethorn beryllium precise tempting, specified actions person a agelong and legally fraught history, and could scare disconnected different cardinal banks looking to parkland assets successful Europe.

An aboriginal illustration of specified enactment cited by European economists successful probe past twelvemonth was the Soviet confiscation of golden shipped to Moscow by the National Bank of Romania backmost successful 1918. The wars of the 20th period yielded dozens much examples.

But European officials who pridefulness themselves connected the region's respect for the regularisation of instrumentality are warring shy of immoderate breach of the legally enshrined immunity of sovereign assets.

"This is not for the European Central Bank to debate, but I would surely taxable that the planetary instrumentality ground connected which immoderate determination is made volition substance arsenic acold arsenic different investors are concerned," ECB President Christine Lagarde said past week.

The last determination rests not with the ECB but its governmental masters successful Berlin, Paris and the different 18 capitals of the euro countries. But they volition not instrumentality Lagarde's statement lightly.

"No-one has immoderate involvement successful doing things that would weaken our strategy now, which is besides being wide attacked elsewhere via trade, tariff, customs policies," French Defence Minister Sebastien Lecornu said past week of threats by Trump to enforce hefty caller levies connected European exports.

DOLLAR DOMINANCE

Europe has agelong had to judge that the euro is improbable to situation the dominance of the dollar arsenic a reserve currency - concisely an aspiration successful the heady days aft its 1999 birth.

In information since 2010, the stock of planetary currency reserves held successful the euro has dropped from 25.8% astatine existent speech rates to 20% arsenic different currencies summation traction. Even the dollar has slipped slightly, portion inactive accounting for 58.4%.

In a study past twelvemonth connected the euro's planetary standing, Lagarde cited challenges ranging from the emergence of different units arsenic trade-invoicing currencies done to renewed involvement successful golden arsenic a reserve plus successful troubled times.