Ukraine may get €1 bn in revenues from frozen Russian assets by July, EU says

European Council President Charles Michel, right, and European Commission President Ursula von der Leyen address a media conference at an EU Summit in Brussels, 21 March 2024
European Council President Charles Michel, right, and European Commission President Ursula von der Leyen address a media conference at an EU Summit in Brussels, 21 March 2024 Copyright Omar Havana/Copyright 2024 The AP. All rights reserved
By Mared Gwyn Jones
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Ukraine could receive €1 billion in windfall profits from immobilised Russian assets as soon as this July, European Commission chief Ursula von der Leyen has said.

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The announcement came late on Thursday evening after the bloc’s 27 leaders backed Brussels’ proposal to give Ukraine up to €3 billion per year in interests from Russian assets that have been frozen in depositaries in EU member states.

The vast majority of the profits would be used to arm and equip the Ukrainian armed forces as they continue to withstand Russia’s war of aggression.

“There's strong support to use the windfall profits or proceeds of the immobilised assets for military purposes for Ukraine,” von der Leyen said while welcoming leaders’ endorsement.

“If we are swift now in concluding the proposal, we could disburse the first billion on the first of July already,” she added. “So it depends on us. It's in our hands.”

Under Brussels’ plan, 90% of the proceeds would flow through the European Peace Facility, a scheme which partially reimburses member states for arms donations to Ukraine, while the remaining 10% would fund Ukraine’s post-war reconstruction.

The political endorsement came despite the constitution of some militarily non-aligned countries - such as Austria and Ireland - prohibiting the provision of lethal weapons to conflict parties.

Austria's Chancellor Karl Nehammer suggested earlier on Thursday that his government would require safeguards to ensure Austrian donations are not directed towards military purposes.

"For us neutrals, it must be ensured that the money where we give consent is not spent on weapons and ammunition," Nehammer told reporters.

"There was originally a discussion that investments should be made in Ukraine for reconstruction, and I think that is a reasonable suggestion."

Ireland's Leo Varadkar said that while his country was militarily neutral, it was not "politically neutral," and would continue to do everything within its power to stand by Ukraine.

Leaders' seal of approval also came despite the European Central Bank's concerns about a potential hit to the euro’s credibility as a global reserve currency, in a clear sign that the bloc is being forced to break with precedent to fulfil Ukraine's battlefield needs.

'Bullet-proof legal framework'

Some €210 billion in Russian central bank assets have been immobilised in the EU since Moscow launched its full-scale invasion of Ukraine in 2022. They are mainly held at the Euroclear financial depositary in Belgium.

But tapping the assets comes with considerable legal risks, with Brussels proceeding with great caution.

"This is about income that can be used, which is not owed to anyone and can therefore also be used by the European Union," German Chancellor Olaf Scholz assured on Thursday.

"And, in my opinion, they will, of course, be used first and foremost for the opportunity to acquire the weapons, the ammunition that Ukraine needs for its defensive struggle."

Belgian Prime Minister Alexander de Croo has already donated the corporate taxes generated from the unexpected interests accumulating in Belgium's Euroclear to Ukraine. But he explained that sending the interests themselves required "macroeconomic stability" and a "bullet-proof" legal framework.

"I feel actually quite confident about the proposal that the Commission has done," De Croo said, adding that the priority is for the proceeds to be used to buy more ammunition for Ukraine.

"Obviously I would love to invest in reconstruction, but reconstruction is a bit pointless if you're losing the war," De Croo added.

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The EU has missed its target of providing Kyiv with one million rounds of ammunition by this month, providing just half of the promised rounds. This failure, combined with waning support from the US, has been a painful setback for Ukrainians on the front line, who have linked ammunition shortages to battlefield losses, including in strategic sites such as Avdiivka in the Kyiv Oblast.

"Unfortunately, the use of artillery at the frontline by our soldiers is humiliating for Europe in the sense that Europe can provide more," Ukrainian President Volodymyr Zelenskyy said in a rebuke to EU leaders via videoconference on Thursday.

It has forced member states to launch their own initiatives, with several capitals joining a Czech-led scheme to send as many as 800,000 shells to Ukraine over the coming months. Sweden will pitch in with €30 million, while Portugal has pledged a hefty €100 million.

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