EU develops a scheme to profit more from frozen Russian assets
Kyiv • UNN
The European Union is developing a scheme to increase profits from almost €200 billion in frozen Russian assets by moving them into riskier investments. This will ensure long-term support for Ukraine.
The European Union is developing a scheme to increase profits from frozen Russian assets by transferring them into riskier investments. The goal is to ensure long-term support for Ukraine without violating international law or resorting to the full confiscation of Russian funds, which some EU member states are avoiding.
Politico writes about this, as reported by UNN.
Details
The European Union is considering a new financial scheme that would allow for increased profits from almost 200 billion euros of frozen Russian assets while maintaining legal caution. This involves, as stated, "transferring these funds into a riskier investment fund," which would allow for higher interest payments and support Ukraine's economy, which is suffering from the war.
According to four informed officials who spoke to Politico, "the idea is to avoid confiscating the principal amount and thus avoid accusations of violating international law."
Full confiscation of Russian assets remains unacceptable to some countries
The assets were frozen in 2022 in response to Russia's full-scale invasion of Ukraine. However, full confiscation remains unacceptable to countries like Germany and Italy, which fear legal and financial repercussions.
Instead, the EU wants to use only the profits from them. This allows, as stated, "to avoid accusations of stealing Moscow's money." Last year, G7 countries agreed to provide Ukraine with 45 billion euros from the proceeds of investing frozen assets.
The EU's share in this package was 18 billion, but it will be depleted by the end of 2025.
Support for Ukraine in 2026
The finance ministers of the 27 EU countries will meet in Luxembourg for an informal dinner to begin discussing this issue.
It is important that we hear from the Commission about available options, especially regarding the potential use of frozen Russian assets and next steps on the sanctions regime,
Poland has also proposed using the new SAFE defense scheme to finance arms supplies to Ukraine. The proposed mechanism opens up space for long-term political discussions: European governments are increasingly facing a choice between continued support for Kyiv and their own budgetary needs, the publication notes.
One option is to create a "special purpose vehicle" under the auspices of the EU, to which frozen assets from Euroclear (Belgium) could be transferred. This would allow funds to be directed to more profitable investments, although it is not yet specified which ones.
Currently, these assets are invested in the Belgian Central Bank with minimal yield. In 2024, such profit amounted to 4 billion euros, which were used to service the G7 debt to Ukraine.
Proponents of the new initiative argue that this approach would increase revenues for Ukraine's support and insure the EU against a possible attempt by Hungary to block the renewal of sanctions and effectively return the funds to Russia.
The EU's sanctions mechanism requires unanimity every six months, and Hungarian Prime Minister Viktor Orbán has already threatened to veto its extension. The European Commission has held informal talks with several countries (France, Germany, Italy, Estonia) to find legal ways to retain frozen assets, even if sanctions were not renewed.
However, a real workaround for this mechanism has not yet been found. Officials are also discussing how to create a new fund based on a simple majority of votes to bypass Hungary's veto power.
At the same time, critics warn that if risky investments do not pay off, the tax burden will fall on EU citizens. The fact that the European Union's budget system within the 1.2 trillion euro program is already overloaded, and the new financial cycle will only begin in 2028, adds to the problems.
As one European diplomat noted, "it will not be easy to find money within the current multi-year financial program." Moreover, a significant portion of the 50 billion euro aid package for Ukraine, approved in 2023 for the period up to 2027, has already been used, the publication adds.
