The European Commission is developing a scheme to transfer almost 200 billion euros of immobilized Russian assets for Ukraine's post-war reconstruction, Politico reports, writes UNN.
Details
Brussels is testing the appetite of EU governments to move assets into riskier investments that could generate more returns for Ukraine and increase pressure on Russia, as it refuses to cease hostilities, several officials said.
Proponents also view the scheme as a step towards potentially seizing assets and transferring them to Ukraine as punishment for Russia's refusal to pay post-war compensation.
"We are advancing work on frozen Russian assets to contribute to Ukraine's defense and reconstruction," European Commission President Ursula von der Leyen said on Thursday, making her strongest statements on the matter.
Importantly, this option would not involve the immediate confiscation of assets, which most EU countries oppose due to financial and legal issues.
Negotiations will culminate on Saturday, when 27 EU foreign ministers will discuss this option for the first time during an informal meeting in Copenhagen, Denmark. During the discussion, ministers should consider "further options for using the proceeds from immobilized Russian sovereign assets," according to a preparatory note.
"As Ukraine faces a budget deficit of approximately 8 billion euros in 2026, EU countries are looking for new ideas to continue financing the war-torn country amid limited domestic budgets and a lack of opportunities to issue pan-European debt," the publication states.
"We hear that it is harder to raise money [from national finances or the EU budget]," said Kerli Veski, Deputy Secretary for Legal and Consular Affairs at the Estonian Ministry of Foreign Affairs. "[But] we have these assets there, and the logical question is: how can we and why are we not using these assets."
The camp for confiscation
Baltic countries bordering Russia and several other countries have long insisted that the EU fully confiscate the assets.
In the European Commission, this idea is promoted by European Commissioner for Economy Valdis Dombrovskis from Latvia and EU foreign policy chief Kaja Kallas from Estonia.
"But this option continues to face resistance from Western European countries, including Germany, Italy, and Belgium. The latter is particularly susceptible to legal and financial risks, as it is home to Euroclear, a financial institution that holds most of the Russian assets," the publication states.
As a compromise, G7 countries in 2024 agreed to direct a total of 45 billion euros of profits generated from investing the assets to Ukraine, while leaving the underlying assets intact.
Nevertheless, the EU's share of the 18 billion euro loan will be fully paid by the end of the year, which has led to calls for additional short-term revenue.
As a workaround, European Commission lawyers are considering transferring the assets to a "special purpose fund" supported by a number of EU countries and possibly foreign states, the publication writes.
Officials compared the proposed new fund to the European Stability Mechanism (ESM) – a fund for rescuing countries, supported only by eurozone members and created outside EU treaties.
The potential fund for Ukraine would also be open to G7 countries, including the UK and Canada, which advocate for asset confiscation, an EU official said, although details are still being finalized.
Overall, this new structure would give the EU greater control over the transfer of assets to Ukraine when the time comes.
Under current rules, one country can effectively return assets to Moscow by vetoing the renewal of sanctions, which is put to a vote every six months. The pro-Russian and pro-Trump government of Hungary is considered the most likely option for such a course, the publication notes.
Transferring funds to a new body, which potentially would not require unanimity, would prevent the threat from Hungary.
Buy low, sell high
Transferring assets to a new fund would also allow them to be placed in riskier investments capable of generating higher returns for Ukraine.
This would be a change from the current rulebook, which obliges Euroclear to invest assets in the Belgian central bank, which offers the lowest risk-free rate of return.
Skeptics, including Euroclear CEO Valerie Urbain, are concerned, however, that EU taxpayers would bear the brunt of any losses incurred by riskier operations.
To share the legal and financial burden, Belgium wants other EU countries to take responsibility for the assets under the European Commission's proposed plan.
"Belgium is not alone here. We need to support and participate in mitigating this risk," Veski said.
"It's not about letting Belgium deal with it, [while] we watch from the sidelines," she noted.
The Belgian government has recently warmed to the European Commission's plan, an EU official and a senior diplomat who is not a Belgian citizen said, while countries further from Russia, such as Spain, also support the idea.