BRUSSELS: The European Union (EU) member states reached an agreement “in principle” on Wednesday on a plan to use billions of euros in profits from frozen Russian central bank assets to arm Ukraine. Leaders of the 27-nation EU agreed in March to move ahead with the proposal expected to unlock some three billion euros ($3.3 billion) a year for Kyiv — but diplomats had yet to hammer out details of the plan.
Belgium, currently holding the EU’s rotating presidency, stated on social media following a meeting of EU ambassadors that the funds would serve to bolster Ukraine’s resilience and enhance security across Europe. Posting on X, the bloc’s Belgian presidency said EU ambassadors had “agreed in principle on measures concerning extraordinary revenues stemming from Russia’s immobilized assets.” “The money will serve to support Ukraine’s recovery and military defense in the context of the Russian aggression,” it said.
EU Commission chief Ursula von der Leyen echoed this sentiment, emphasizing that redirecting these assets to Ukraine would contribute to making both Ukraine and the broader European region safer. “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 to its neighbor in February 2022.
The decision, although hailed as a positive step, has faced some criticism for not going far enough. Despite concerns, EU diplomats have agreed to utilize the income generated from frozen Russian state assets, estimated at approximately €3 billion per year, to provide financial assistance to Ukraine for arms procurement and reconstruction efforts.
Since the full-scale Russian invasion of Ukraine in 2022, around €210 billion in assets belonging to the Moscow central bank have remained frozen within the EU, primarily held at the Euroclear depositary in Belgium.
The plan to allocate interest payments from these frozen assets to Ukraine’s reconstruction and military expenditure has been supported by the Group of Seven leading industrialized democracies. The move aligns with Ukraine’s efforts to bolster its defense capabilities amidst ongoing conflict, further reinforced by recent financial support from the US Congress totaling €89 billion.
However, Ukrainian officials have urged the EU to go beyond merely utilizing interest payments and advocate for the full confiscation of Moscow’s assets to ensure accountability for the costs of the war.
Negotiations surrounding the agreement were prolonged due to concerns over the administration fee retained by Euroclear and Belgium’s taxation of profits gained by the Brussels-based securities depository.
The final agreement allows Euroclear to retain a provisional buffer equivalent to 10% of the profits, with an additional 0.3% kept as an incentive, while 90% of the funds will be allocated via the European Peace Facility to assist Ukraine in procuring weapons.
Belgian Prime Minister Alexander De Croo has committed to directing approximately €1.5 billion directly to Ukraine, although this allocation appears to stem from existing corporate tax regulations applied to Euroclear’s unexpected gains.
The implementation of this mechanism is anticipated to commence by July, with the calculation of funds backdated to February when Euroclear formally segregated the assets.
EU ambassadors have also endorsed the reforms Ukraine must undertake to access funds from a separate €50 billion facility consisting of EU grants and loans.
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