EU aims to fast-track up to €3 billion for Ukraine from frozen Russian assets this July

The European Union is embarking on a initiative to expedite the release of up to €3 billion in funding for Ukraine, generated from frozen Russian assets.

Mar 13, 2024 - 07:16

EU aims to fast-track up to €3 billion for Ukraine from frozen Russian assets this July

The European Union is pushing an ambitious plan to rapidly unlock up to €3 billion in funding for Ukraine this year by seizing profits derived from frozen Russian assets held by the Brussels-based securities depository Euroclear.

Those frozen Russian funds at Euroclear, which have totaled around €3.85 billion in profits so far, have been at the center of a heated debate in Brussels over whether and how to divert the money to aid Ukraine as the brutal war drags on.

According to European officials, the European Commission is preparing a proposal that would allow it to appropriate 97% of the net profits generated since February from the roughly €190 billion in Russian sovereign assets immobilized at Euroclear due to Western sanctions over Moscow’s invasion of Ukraine, Financial Times reports.

The Commission now aims to fast-track an initial tranche of €2-3 billion from the Euroclear profits to Kyiv potentially as soon as July, if the plan can secure approval from the European Union’s 27 member states, officials said. A formal proposal is expected ahead of next week’s summit of EU leaders.

The urgent push comes as US military aid to Ukraine has stalled amid opposition from Republican lawmakers, raising pressure on European partners to help fill a funding gap for the Ukrainian military’s fight against Russia’s full-scale invasion. According to Ukraine’s Finance Ministry, only about half of the $37 billion needed from international donors this year has been committed so far.

Four reasons the West should finally seize Russia’s frozen assets for Ukraine

Originally, the EU had planned to use any Russian asset profits to help fund postwar reconstruction in Ukraine. But Commission President Ursula von der Leyen has advocated repurposing the money for more immediate military support, calling last month for the funds to purchase weapons for Ukrainian forces – a position likely to face resistance from some member states.

With G7 countries split over whether to seize the underlying assets and hand them over to Ukraine, the EU proposed a parallel track of using only the profits, according to EU officials involved in the discussions.

Under the emerging proposal outlined in a draft document, the frozen Russian asset profits transferred from Euroclear to the EU budget could then be disbursed to Ukraine every quarter or twice annually “according to different arrangements.”

That could include using the money to buy weaponry for Kyiv through the European Peace Facility fund that has disbursed over €3.6 billion in military aid so far. Or it could be invested into strengthening Ukraine’s domestic defense industry, which EU foreign policy chief Josep Borrelll recently described as “strong and innovative” after visiting a drone manufacturing plant.

In total, the Euroclear profits from the frozen Russian assets are estimated to reach a staggering €20 billion through 2027 if the current level of immobilized funds is maintained, presenting a major potential revenue stream for Ukraine’s war effort and recovery.

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However, the proposal faces legal and political hurdles as the EU would essentially be seizing money owed to Moscow in an unprecedented move. The initial €3.85 billion in Euroclear profits already accrued will be retained by the depository to cover anticipated legal costs, as Russia is already pursuing over 100 lawsuits over the immobilized assets.

European officials warned that Russian courts could even order retaliatory seizures of up to €33 billion in Western assets currently blocked at Russia’s central securities depository.

There are also divisions among EU capitals over the appropriate use of the frozen Russian funds, with some favoring spending only on non-military reconstruction rather than arming Ukraine. Hungary’s Viktor Orbán is among those likely to push back on bankrolling more weapons.

Still, mounting economic strains and dwindling US aid have increased pressure in Brussels to get creative in financially sustaining Ukraine’s resilience against Russia’s continued aggression.

“The hotly debated question of whether to use Russian funds tied up in Brussels-based Euroclear to aid Ukraine has become more pressing as the war has entered its third year and international aid has dwindled,” the Financial Times reported.

According to EU officials, channeling the Russian asset profits to Ukraine represented “low-hanging fruit” compared to the even more complex proposition of trying to seize the underlying €190 billion frozen at Euroclear that Moscow still claims as its sovereign wealth.

For now, the Commission plan offers a way to rapidly unlocking billions in new funding for Ukraine in the coming months – a short-term solution that could soon face tougher fights over the final destination and dispensation of Russia’s far larger war chest of frozen assets.

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