BRUSSELS: EU member states reached agreement Wednesday on a plan to use billions of euros in profits from frozen Russian central bank assets to arm Ukraine and fund its post-war reconstruction.
Moscow has made a string of battlefield gains in recent months, pressing its manpower and weapons advantage as Kyiv awaited critical new Western aid more than two years into the conflict.
With Washington finally set to deliver on a long-stalled package of aid, Kyiv’s other major backer the European Union has also been pushing for months to find more funds.
Leaders of the 27-nation bloc agreed in March to move ahead with the assets proposal, expected to unlock some three billion euros ($3.3 billion) a year, but diplomats still needed to hammer out the details.
Posting on X, the bloc’s Belgian presidency said EU ambassadors had “agreed in principle on measures concerning extraordinary revenues stemming from Russia’s immobilised assets”.
Use Russian asset profits to arm Ukraine: EU chief
It said the funds would “serve to support Ukraine’s recovery and military defence in the context of the Russian aggression”.
“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,” added EU Commission chief Ursula von der Leyen.
The EU froze around 200 billion euros of Russian central bank assets held in the bloc as part of punishing sanctions imposed on Moscow for sending troops into its neighbour in February 2022.
Simply confiscating all that money and giving it to Ukraine’s reconstruction efforts is not seen as an option, as that could rattle international markets and undermine the euro.
But EU leaders settled instead on a plan to target the interest being paid on the frozen assets – which they insist is legally sound despite warnings by the Kremlin it would trigger “serious consequences”.
‘First step’?
Under the deal, to be submitted to EU ministers for formal approval, 90 percent of the interest would go to a central fund used to pay for weapons for Ukraine, the European Peace Facility, while 10 percent would go to the EU’s separate Ukraine Facility.
About 90 percent of the funds frozen in the EU are held by the international deposit organisation Euroclear, based in Belgium.
As part of the agreement, diplomats said Belgium agreed to send Ukraine the totality of the tax revenues generated by the profits since the start of the war – which had been a sticking point in negotiations.
Russia can’t match a Western asset seizure, but it can inflict pain
That is expected to free up an additional 1.7 billion euros for Ukraine in 2024.
Euroclear’s fee for handling the assets was also slashed tenfold, to 0.3 percent of profits, as part of the deal, diplomats said.
European capitals had been pressing to lower the fees levied by the clearing house – which reported net interest earnings related to Russian sanctions of 4.4 billion euros in 2023.
While Russia has put its economy on a war footing, the EU has fallen well short of a promise made last year to supply Ukraine with a million artillery shells by this month.
The EU has put forward a raft of proposals aimed at arming Ukraine and helping it build up its own forces.
Those include allowing the EU’s financing body to open up lending to more technologies that can be used by militaries – a step formally approved by the board of the European Investment Bank Wednesday.
But there are complaints Europe is still not moving fast enough.
The foreign minister of Estonia – which is leading the drive to ramp up support for Kyiv – said Wednesday’s deal should be viewed as a “first step” towards using the full amount of frozen Russian assets.
“Three billion per year for Ukraine is nothing compared to 200 billion to help Ukraine win,” Margus Tsahkna posted on X.
The massive US aid package approved last month – which earmarks $61 billion for Kyiv – authorises the president to confiscate and sell Russian assets to finance Ukraine’s reconstruction, an idea gaining traction with other G7 countries.
In total an estimated $397 billion in Russian assets have been frozen by the West: three-quarters in central bank assets but also yachts, real estate and other property from oligarchs close to President Vladimir Putin.