Diplomatic representatives of the 27 member states of the European Union (EU) reached an agreement on Wednesday to use part of the profits generated by frozen Russian assets for the benefit of Ukraine, an unprecedented and controversial measure.
The proceeds from frozen Russian state assets worth around 3 billion euros will be used to buy weapons and for the reconstruction of Ukraine and should be used by the summer.
Following the large-scale Russian invasion of Ukraine in February 2022, the EU decided to freeze 210 billion euros in Russian central bank assets, which are mostly deposited in the Euroclear financial institution in Belgium.
The “in principle” agreement was announced on the social network X by the Belgian presidency of the EU Council.
The European Commission has long advocated using interest from these funds, estimated at around €3 billion a year, for Ukraine’s reconstruction costs – and later expanded its plans to cover the Kiev government’s military expenses. .
This idea has the support of the G7 (group of seven main industrialized democracies) and comes at a time when Ukraine is trying to respond to a more intense Russian military campaign. Recently, the US approved a new financial package worth 89 billion euros for Ukraine.
Confiscate everything?
The Ukrainian government considers that the EU can go further than using the profits generated by deposits and that it must confiscate all Russian assets to ensure that the aggressor pays the costs of the war.
However, there have been warnings from several EU governments and the European Central Bank that such total confiscation could set a dangerous precedent and damage the euro’s reputation as a safe currency.
Negotiations have been slow also because of the percentage of assets that would be retained by Euroclear as an administration fee, a value that initially reached 13%, as well as Belgium’s right to tax the profits obtained by the depositary of securities based in Brussels.
Belgian Prime Minister Alexander De Croo has already promised to send around 1.5 billion euros directly to Ukraine, although this appears to be the result of applying existing corporate tax legislation to the level of windfall profits that Euroclear obtains from these assets.
Today’s agreement states that Euroclear will retain 0.3% as an incentive and 90% of the funds will be sent through the European Peace Support Mechanism to help Ukraine buy weapons.
Commission President Ursula von der Leyen previously suggested that Ukraine could receive the first funds under the mechanism by July, but the calculation will be backdated to February.
The ambassadors also reached an agreement on the reforms that Ukraine will have to carry out to receive funds from another EU grant and loan mechanism, worth 50 billion euros.
2024-05-08 15:10:12