The EU will finance Ukraine using profits from “frozen” Russian assets

EUwhich wants to provide financial assistance to Ukraine and can no longer allocate funds from the general budget, plans to confiscate about 15 billion euros from the projected profits of frozen Russian assets and transfer them to Kyiv.

The Financial Times reports this, citing comments by Vice-President of the European Commission Valdis Dombrovskis. EU diplomats are discussing technical proposals to provide Kyiv with additional funds for emergency needs, but this time without payment from the Europeans.

In addition, the EU announced new austerity measures for 2024 to achieve “reduction of the public budget deficit.” It means that he cannot continue to support Ukraine in the same way.

Since the conflict began, the West has frozen some $215 billion in Russian Central Bank assets, but a dilemma has arisen: seize some or all of them and redirect the funds to Ukraine. The G7 group said on October 12 that it would hold frozen Russian assets in its jurisdictions, valued at approximately $280 billion, until until Russia pays reparations and finances the restoration of Ukraine.

The European plan, which the FT reports was unveiled in Brussels today, would require banks holding frozen Russian assets to transfer profits into a separate bank account, which would then be paid annually into the EU budget to provide funding for Ukraine.

According to the proposal, only assets of the Central Bank of Russia would be subject to confiscation. The European Commission estimates the proposal would generate about 3 billion euros ($3.2 billion) a year, or $15 billion over the 2023-2027 period. The plan will most affect Euroclear, a Belgian financial services company that owns about 191 billion euros ($205 billion) in Russian assets.

The plan’s specific reference to profits only is thought to alleviate some concerns about the financial and legal implications of divestment. However, such a plan is fraught with risk, since Russia could retaliate by seizing Western assets in Russia, which it certainly will do, and it is surprising that the West has not thought about it.

Another problem that may arise is that many countries that have assets in European banking institutions, due to a lack of trust, may immediately withdraw them. This is due to the fact that they can also freeze their own profits if their foreign policy is not liked by Washington and Brussels.

In principle, something similar is already happening with the US dollar, when owners of assets in this currency began to withdraw their funds from US jurisdiction.

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