EU Takes First Step to Use Frozen Assets of Russia to Rebuild Ukraine
By Jace Dela Cruz
Feb 13, 2024 03:30 AM EST
Feb 13, 2024 03:30 AM EST
The European Union (EU) has taken a significant step to support Ukraine by adopting a law to allocate windfall profits on frozen Russian central bank assets for rebuilding the war-struck country.
The freezing of around 300 billion euros ($323 billion) of Russian central bank assets by the EU and the Group of Seven (G7) nations in 2022 was in response to Russia's invasion of Ukraine.
According to Reuters, the law passed on Monday was the first concrete move towards the EU's aim of using the money generated by the frozen funds for the reconstruction of Ukraine. For more than a year, the EU and G7 have reportedly been discussing whether and how these funds can be used.
The United States has suggested seizing the assets outright, but EU officials deem it legally too risky. EU officials have not only expressed concerns about the legality of seizing sovereign assets but also feared potential repercussions for the euro currency and Russia's actions in retaliation.
Some $200 billion of this fund is held in Europe, most of which is in the Belgian clearing house Euroclear. So far, only taxes on the assets in Belgium have been set aside to a dedicated fund for Ukraine managed by the Belgian government.
The newly passed law means that central securities depositaries (CSDs), like Euroclear, will be banned from utilizing net profits and should keep revenues from Russian assets set apart. It reportedly applies to institutions holding over 1 million euros ($1.1 million) of the Russian central bank assets.
The Council of the EU, a legislative body that groups member states, said the decision aligned with the G7 position, and it clarified "the legal status of the revenues generated by the CSDs in connection with holding Russian immobilized assets and setting clear rules for the entities holding them."
The EU expects approximately 15 billion euros ($16.17 billion) in profits to go towards Ukraine for the next four years, complementing the 50 billion euros ($53.89 billion) the EU allocated in aid to Kyiv.
Ukraine's Foreign Minister Dmytro Kuleba welcomed the EU's decision.
"We encourage further steps to enable their practical use for Ukraine's benefit. These steps must be ambitious and prompt," Kuleba wrote on X.
Russia previously said that any attempt to use frozen Russian assets as collateral to raise funds for Ukraine is illegal and vowed to retaliate by confiscating Western assets in the country, which is reportedly worth $288 billion.
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