The EU will take a major step to confiscate a possible €27bn profit that could be generated by Russian assets in Europe, which are frozen for the next four-year period. This money would help finance the war effort in Ukraine.
Officials from the European Commission will likely present a proposal that they consider to be legally sound to member states. This could happen before a meeting between prime ministers next Thursday in Brussels.
Around $300bn of the Russian central banks have been frozen by the west. This money is mainly in the form of foreign currency, government bonds and gold. Around 70% of them are in the Belgian central depository Euroclear which holds the equivalent of €190bn.
A senior EU official stated that deposits held in Europe will likely generate after-tax profits of between €15bn to €20bn between now and the end of 2027. This is the end of EU’s current cycle.
This year, they could generate anywhere between €2bn to €3bn of profits depending on interest rate fluctuations. The money would then be sent directly to Ukraine.
Officials are optimistic about an agreement to seize the profits. However, there is no agreement yet on the use of the money, as some countries are opposed to using the cash for Ukraine’s military and prefer that it be spent on humanitarian aid and reconstruction.
Ireland, for instance, has a long-standing foreign policy that binds it to neutrality, but the country contributes money to Ukraine under the condition that they are used in “non lethal” ways, such as clearing landmines.
According to sources, the European Commission is not offering any options for the time being in regards to the use the money. Sources said that the European Commission can in principle agree to use profits, but will then discuss where this money can be used constitutionally by each member state.
The process has gained momentum, and we anticipate that the wheels will turn very quickly once a decision is taken.”
Last month, EU leaders agreed to hold the proceeds in a separate bank account. This cleared the war for the “step B” decision.
The communique that ambassadors will draft for the approval of prime ministers next week is vague enough. The communique states that “the European Council reviewed progress in determining the next concrete steps to direct extraordinary revenues derived from Russia’s assets immobilised for Ukraine, including funding military support.”
Some of the money is expected to be retained by the EU in a long-term defence fund for the Russian legal retaliation that will likely occur.
Any agreement will pressure the British government into following suit. David Cameron, the British foreign secretary, joined Volodymyr Zelenskiy in asking for the money in the UK to be confiscated and given to Kyiv.
Financial institutions are resisting the idea, as they fear that it will undermine the trust in London.
It is expected that the move will be met with retaliation both before and after the war. Officials believe some of the funds should be kept in Euroclear to serve as a buffer against future court costs.
The official stated that “Euroclear will be facing a lot claims.”
The Russian courts are not aware of the sanctions imposed by the West and may seize €33bn Euroclear assets in Moscow, which are held in national securities.
This week, the Swiss Parliament voted to allow some of the €8bn in Russian assets that it held on deposit to go towards reparations of damage caused by an aggressor.
It was feared that such an action would undermine Switzerland’s well-armed neutrality.
According to Agence France-Presse’s foreign minister Ignazio Cass: “We do not have to blush when talking about Ukraine on an international stage.”