In a landmark decision, the European Union has announced that it will allocate approximately $3.25 billion from the profits of frozen Russian sovereign assets to aid Ukraine’s military efforts.
The funds, drawn from revenues generated by the immobilized assets of the Russian Central Bank, are part of a broader strategy to leverage economic sanctions against Moscow without directly confiscating the principal amounts, which could provoke severe legal and diplomatic repercussions.
“Russia must pay for its war damages,” asserted Czech Republic Minister of Foreign Affairs Jan Lipavský. The EU’s decision, endorsed by the European Council, follows protracted discussions on the most legally sound method to utilize the frozen assets. The EU, alongside the Group of Seven and other U.S. allies, has immobilized roughly $282 billion in Russian assets, with about two-thirds under EU jurisdiction.
The revenue generated, estimated between €2.5 to €3 billion annually, is earmarked primarily for military support, with 90% funnelled into the European Peace Facility, a fund used by EU member states to reimburse arms and ammunition supplied to Ukraine. The remaining 10% will support various EU programs aimed at bolstering Ukraine’s defense industry and aiding reconstruction efforts.
Sweden’s Anders Ahnlid, who spearheaded the EU’s working group on utilizing the frozen assets, remarked, “Those windfall gains that amount to between 2 and 4 billion euros per year could be used for Ukraine’s reconstruction without interfering with international law.”
The decision has not been without controversy. Kirill Logvinov, head of Russia’s permanent mission to the EU, accused the EU Council of elevating “theft to the rank of instruments of its foreign policy,” cautioning that the precedent could lead to unpredictable consequences for the eurozone and the investment climate.
While the EU’s approach aims to avoid outright confiscation, thereby mitigating the risk of reciprocal asset seizures by Moscow, it does set a significant precedent in the international handling of frozen state assets. “The consequences of the created precedent will definitely be unpredictable, including for the eurozone, the economies of the bloc’s member countries, and the investment climate,” Logvinov warned in an interview with Russian state news agency Tass.
Despite these concerns, the EU is moving forward. The European Commission has indicated that the first tranche of funds will be available by July 2024, with bi-annual payments planned to ensure a continuous flow of resources to Ukraine. This support is crucial as Ukraine faces ongoing military challenges and embarks on a massive rebuilding effort.
In the context of the entire $300 billion in frozen Russian assets, the $3 billion annual profit might appear modest.
Relevant articles:
– Billions from Russia’s frozen assets will go to help Ukraine’s military, the EU says, npr.org, 05/23/2024
– EU seals a deal on using profits from frozen Russian assets to help arm Ukraine, ABC News, 05/21/2024
– E.U. sets precedent with plan to use profits from frozen Russian assets, The Washington Post, 05/21/2024
– EU to give Ukraine billions of dollars in profits from frozen…, WORLD News Group, 05/21/2024
– EU Council approves transfer of frozen Russian asset revenue to Ukraine, Ukrainian World Congress, 05/22/2024
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