In a landmark decision with far-reaching implications, the European Union has reached a consensus to channel the windfall profits derived from frozen Russian assets toward aiding Ukraine.
Ambassadors from the EU’s member states have endorsed a plan, in principle, to allocate the interest accrued on frozen Russian assets for the procurement of weapons for Ukraine, a decision that could potentially funnel up to €3bn annually into Kyiv’s coffers for its defense. If ratified by the EU finance ministers, this will set a precedent in repurposing frozen assets of an aggressor state to assist its victim.
The assets in question, amounting to almost €211bn, have been immobilized within the EU’s jurisdiction, predominantly in the Belgium-based clearing house, Euroclear, since the conflict’s escalation in 2022. The move to use the interest generated by these assets—estimated to be €3bn per year.
European Commission chief Ursula von der Leyen hailed the decision as a potent symbol and an optimal use of the funds, stating, “There could be no stronger symbol and no greater use for that money than to make Ukraine and all of Europe a safer place to live.” Echoing this sentiment, European Trade Commissioner Valdis Dombrovskis emphasized the urgency of channeling the funds to Ukraine, ideally by summer, “Russia will pay directly for its crimes,” Mr Dombrovskis said.
A first tranche of €1bn is expected to be directed mainly towards military support. The approach, however, did require navigating a complex web of financial and legal considerations, including objections from EU members over a tax imposed under Belgian law, which has now been waived. Europe’s central bankers were also long sceptical about potentially setting a difficult legal precedent that could undermine global financial stability – as well as putting off other countries from placing their safe haven assets in the West.
The Kremlin has previously said that seizing the interest made on frozen Russian assets was a move towards the “destruction of the legal foundations of European law and international law”.
Relevant articles:
– EU moves to give profits from Russian assets to Ukraine, BBC, 05/09/2024
– EU reaches tentative deal on Ukraine aid coming from profits of frozen Russian assets, Voice of America – VOA News, 05/08/2024
– Brussels agrees to send €3bn from frozen Russian assets to aid Ukraine, Euronews, 05/08/2024
– EU reaches deal on using profits from Russia’s frozen assets for Ukraine, The Guardian, 05/08/2024
– EU agrees to use profits from frozen Russia’s assets to support Ukraine, Euromaidan Press, 05/08/2024