The European Commission is devising a scheme to transfer almost EUR 200 billion in Russian immobilized assets to rebuild Ukraine at the end of the war.
That is according to Politico, citing several officials, Ukrinform reports.
The officials said Brussels is testing the appetite of national capitals for moving the assets into riskier investments that could generate more profits for Ukraine and amp up pressure on Russia as it refuses to stop the fighting.
Supporters also see the scheme as a step toward potentially seizing the assets and handing them over to Ukraine as a punishment for Russia’s refusal to pay post-war compensation.
“We are advancing the work on the Russian frozen assets to contribute to Ukraine’s defense and reconstruction,” European Commission President Ursula von der Leyen said on Thursday, in her strongest remarks so far on the subject.
Crucially, this option would fall short of immediately confiscating the assets, which a majority of EU countries oppose due to financial and legal concerns.
According to Politico, talks will come to a head on Saturday when the EU’s 27 foreign ministers debate the option for the first time during an informal gathering in Copenhagen, Denmark.
A preparatory note seen by the news outlet states that during the discussion, ministers should look at “further options for the use of revenues stemming from Russian immobilized sovereign assets.”
Baltic countries bordering Russia and several others have long been pushing on the EU to confiscate the assets altogether. Within the Commission, Latvian Economy Commissioner Valdis Dombrovskis and Estonian Foreign Policy Chief Kaja Kallas have been advancing this idea.
But this option continues to be met with resistance from Western European countries, including Germany, Italy and Belgium. The latter is particularly exposed to the legal and financial risks because it hosts Euroclear, the financial institution that holds the bulk of the Russian assets.
As a compromise, G7 countries in 2024 agreed to funnel a total of EUR 45 billion in profits generated by investing the assets to Ukraine, while leaving the underlying assets untouched. Nevertheless, the EU’s EUR 18 billion share of the loan will be entirely paid out by the end of the year ― prompting calls to generate additional revenues within a short timeframe.
As a workaround, the Commission’s lawyers are looking into transferring the assets into a “special purpose vehicle” backed by a number of EU and potentially foreign countries.
Officials compared the mooted new fund to the European Stability Mechanism (ESM), a money pot to bail out countries that is only backed by eurozone members and was set up outside the EU treaties.
The potential fund for Ukraine would also be open to G7 countries, including the UK and Canada, that are in favor of confiscating the assets, said an EU official, although the details are still being hammered out.
Overall, this new structure would give the EU greater control to hand over the assets to Ukraine when the time is right.
Under the current rules, a single country can effectively hand the assets back to Moscow by vetoing the renewal of sanctions, which comes up for a vote every six months. Hungary’s pro-Russia and pro-Trump government is seen as the likeliest to take this course.
Shifting the funds to a new body with potentially no unanimity requirements would stave off Hungary’s threat.
Transferring the assets into a new fund would also allow them to be placed in riskier investments capable of generating higher returns for Ukraine. That would be a change from the current rulebook, which compels Euroclear to invest the assets with the Belgian central bank, which offers the lowest risk-free rate of return available.
Skeptics, including Euroclear CEO Valerie Urbain, worry, however, that EU taxpayers would have to bear the brunt of any losses resulting from the riskier operations.
The Belgian government has recently warmed to the Commission’s plan, said an EU official and a senior non-Belgian diplomat, while countries farther away from Russia, such as Spain, are also backing the idea.
Photo: DANIEL KALKER / DPA
Source: EU seeks to transfer nearly EUR 200B in frozen Russian assets to rebuild Ukraine - Politico
