Assets worth over 200 million euros stored at Luxembourg’s freeport, formally known as High-Security Hub, have been frozen as part of the EU sanctions against Russia, Luxembourg finance minister Yuriko Backes has told parliament. This follows the 4.3 billion euros in frozen Russian-linked assets that were announced by the ministry of finance last week.
Backes disclosed the action in an answer to parliamentary questions from déi Gréng, Luxembourg’s Green party, deputy François Benoy on measures to apply the EU sanctions at the freeport. She specified that 210,327,140 euros in assets at the freeport have been frozen.
High-security warehouse
The Luxembourg High-Security Hub, formerly called ‘Le Freeport Luxembourg’, is an architecturally striking 22,000 square meter, 4-storey, 50 million euro, high security warehouse located near Luxembourg’s Findel airport. It opened in 2014 and provides temperature and humidity-controlled storage for works of art, fine wines, vintage cars, precious metals, pharmaceuticals, rare minerals, data and luxury goods.
Freeports have been compared to off-shore financial centres in offering security and confidentiality, little scrutiny, the ability for owners to hide behind nominees and tax advantages. Because items stored at the facility are technically “in transit” they are not subject to taxation. As it opens directly onto Findel airport, anything inside is deemed not to have entered Luxembourg.
Luxembourg’s facility and others like it have been seen as attractive to wealthy Russian oligarchs who either are or expect to be added to the sanctions list. In the early stages of the sanctions, levied after Russia’s unprovoked invasion of Ukraine, some questioned whether freeports could offer a safe haven for Russian oligarchs.
Substantial criticism has been levied at Luxembourg’s freeport. In 2018 two European parliamentarians argued in their report on money laundering and tax evasion in the EU that freeports “offer offshore storage solutions that can promote money laundering and tax concealment”. German MEP Wolf Klinz has said that the Luxembourg facility had “been alleged to be a fertile ground for money laundering and tax evasion.”
The freeport’s management has disputed these allegations, stating the facility is primarily used in order to obtain insurance premium reductions, not to evade taxes.
Well-established phenomenon
Luxembourg is not the only European country with a freeport. The largest in the world is in Switzerland, the Ports Francs et Entrepots de Geneve, which played a role in providing Red Cross relief supplies to prisoners of war in Europe. Luxembourg’s freeport has been linked through common ownership with the similar facilities in Singapore, with plans to double its size being discussed, and Geneva. Others are located in Chiasso, Zurich and Basel in Switzerland, and one in Beijing, China.
Freeports are a kind of free-trade zone, a special economic zone, located in a geographic area where goods can be imported, stored, handled, manufactured, reconfigured and re-exported under specific customs regulation and generally not subject to customs duty. These zones are generally placed around major seaports, international airports and national borders, areas offering geographic and other advantages to trade.
Backes answered Benoy’s question about how many checks had been carried out in the freeport since the beginning of the sanctions by stating that “all of registered operators in the free zone were subject to checks in place since the adoption of the first restrictive measures on 23 February 2022.” Backes added that “No irregularity was declared by the inspectors from the Administration de l’Enregistrement, des Domaines et de la TVA.”