EU Council approves use of profits from frozen Russian assets for Ukraine

The Council of the European Union has approved a plan to utilize profits from frozen assets of the Central Bank of Russia for Ukraine’s benefit, the Czech Permanent Representation to the EU announced. This amounts to €2.5-€3 billion annually. Most of the funds will be directed towards Ukraine’s military needs.

Key Facts

• Czech Foreign Minister Jan Lipavsky stated that EU countries approved the plan to use profits from frozen Russian Central Bank assets to aid Ukraine.

• In 2024, Ukraine is expected to receive €2.5-€3 billion, with 90% of the expected funds allocated for military purposes to support its defence.

• The EU plan involves transferring income received after February 15th to Ukraine. Funds received before this date will be retained in the Belgian depository Euroclear to cover potential risks such as lawsuits in Russia, Bloomberg reports.
• The assets are expected to generate approximately €5 billion annually, with Ukraine receiving aid biannually.
• Supplemented: Profits from the use of frozen Russian assets will be used for further military support to Ukraine, including the involvement of Ukrainian defence industry enterprises, as well as recovery programs, according to a press release of the EU Council.
• The approved mechanism requires central depositories in EU countries holding Russian sovereign assets and reserves exceeding €1 million to allocate a portion of the net profit generated from these assets, accumulated since February 15, 2024, for these purposes.
• These amounts will be paid biannually by EU Central Depository Banks and used for continued military support to Ukraine through the European Peace Facility, as well as supporting Ukraine’s defence industry and the country’s reconstruction needs under EU programmes. The funds will be allocated as follows: 90% to the European Peace Facility and 10% to EU programmes funded from the EU budget.
• This distribution will be reviewed annually, for the first time before January 1, 2025. Central depositories in EU countries will be allowed to temporarily retain approximately 10% of the profits received from frozen Russian assets to maintain their statutory capital and risk management requirements due to the impact of the war in Ukraine.

Context

The EU, U.S., Japan, and Canada froze about $300 billion of the Russian central bank’s assets after Russia invaded Ukraine in 2022. Only about $5-6 billion are held in the United States, with most located in Europe, particularly in Belgium’s Euroclear. Since the war began, these assets have generated €3.85 billion in profits, which EU countries have discussed using to aid Ukraine.

The U.S. and UK have been pushing the EU to confiscate all frozen assets. However, efforts to do so have faced significant opposition from France, Germany, and the European Central Bank, who are concerned about potential negative impacts on the euro. Washington has proposed a new initiative to raise borrowed funds against future revenues.

Recently, Germany reportedly supported the U.S. plan to use revenues from frozen Russian assets to finance Ukraine, including a potential loan of up to $50 billion.

The G7 will discuss this issue this week, with a decision expected in June.

forbes.ua