EU explores using €170 billion in frozen Russian assets for Ukraine: FT learns details
Kyiv • UNN
The European Commission is developing plans to use frozen Russian assets to provide €170 billion in reparations loans to Ukraine. These plans involve transferring Russian cash to Ukraine without formally seizing the assets.
Brussels is preparing options for using frozen Russian assets to provide 170 billion euros in reparations loans to Ukraine, the Financial Times reports, writes UNN.
Details
These plans, long sought by Ukraine but fiercely debated within the EU, aim to effectively allow the transfer of Russian cash to Ukraine without formally seizing the assets, the publication writes.
Under one option, according to five officials familiar with the preparations, the residual funds of sanctioned Russian central bank assets held at the Belgian central securities depository Euroclear would be used to purchase interest-free EU bonds.
The capital raised would then be transferred to Ukraine in tranches, the publication writes.
According to two sources familiar with the situation, about 170 billion euros of the 194 billion euros in Russian assets held at Euroclear have already matured and are now reflected as funds on Euroclear's balance sheet.
A second option involves using a special purpose vehicle to manage financing mechanisms, which could allow non-EU countries to participate.
European Commission President Ursula von der Leyen last week backed the idea of reparations loans, saying they would only need to be repaid if Russia agreed to compensate Ukraine for the damage caused by the invasion. She said that instead of waiting for the conflict to end, this money "will help Ukraine today."
The publication notes that Brussels has intensified technical work on the proposal.
Washington, the publication notes, is also pressuring its allies to use Russian assets, not just the profits that were used to secure a $50 billion loan to Ukraine last year. According to a US memo circulated among G7 members and seen by the Financial Times, G7 countries should "consider seizing (or otherwise using) the principal [of Russian sovereign assets] in an innovative way to fund Ukraine's defense."
EU finance ministers meeting this week in Denmark plan to discuss the idea of reparations loans.
The European Commission's actions, it is noted, are aimed at overcoming the objections of a number of EU member states, including Belgium, Germany, and France, who are concerned that seizing the principal instead of interest would be a violation of law or undermine confidence in the euro as a reserve currency.
Ukraine is counting on 50 billion dollars in budget support next year, in addition to military aid, and Europe will have to bear most of the burden given Washington's refusal to provide further assistance, the publication writes.
"[Ukrainians] need money, and there aren't many options," said a German official familiar with the plans.
German Chancellor Friedrich Merz was enthusiastic about the ideas developed by the European Commission, given the limited budgets of the bloc's member states and the exhaustion of EU credit opportunities, the publication writes.
His diplomatic adviser, Günther Sautter, said at a conference in Kyiv that discussions on frozen assets in Europe "are moving too slowly. But they are moving. And they are moving in a certain direction" - first by using the profits generated from these funds, "and now there is a proposal on how they could be used even more actively... and this could accelerate the process."
The discussion itself was useful, Sautter added, "because it creates uncertainty for the Russian side."
The key elements of the options, the publication points out, remain subject to discussion. For example, the use of Eurobonds would require EU member states to guarantee the loans. "The risk will have to be borne collectively," von der Leyen said in her statement last week, alluding to Belgium's concerns about potential liability in any legal proceedings initiated by Russia.
Another potential obstacle is ensuring the freezing of underlying assets, the publication writes. Currently, EU sanctions, under which Russian assets are blocked, require unanimous support from EU member states to extend their validity every six months.
Issuing long-term bonds backed by Russian assets would require guarantees that the sanctions regime will remain in place for the entire term of the loan, a source said.
Kremlin spokesman Dmitry Peskov warned on Monday that the use of Russian assets "will not go unanswered."
The European Commission said it would "act as quickly as possible to provide further financial support to Ukraine."
"Any such initiative will be based on Ukraine's most urgent needs and in close consultation with member states and international partners," the spokesperson added.
Euroclear declined to comment.