EU prepares law on profits from frozen Russian assets for Ukraine, may start to flow as early as July - Bloomberg
Kyiv • UNN
The European Union has prepared legislation that will allow Ukraine to receive income from frozen Russian assets, estimated at about €3 billion a year, starting in July to finance arms supplies and support the Ukrainian defense industry.
The European Union has prepared legislation according to which Ukraine will start receiving profits from frozen Russian assets "as early as July," Bloomberg reports, UNN writes.
Details
"The proposals, which require the support of all member states, envisage the introduction of a tax on windfall profits generated from immobilized reserves, with the aim of using approximately 3 billion euros a year to finance arms supplies to Ukraine and stimulate the country's defense industry," the newspaper writes, citing draft documents it has seen.
"According to the EU proposal, a share of the revenues received since February 15, which has not yet been determined, will be transferred to the EU twice a year until the sanctions are lifted. Initially, the funds will be directed to the European Peace Fund (the bloc's mechanism for reimbursing the cost of weapons supplied to Ukraine), as well as to the EU budget fund for Ukraine," the newspaper writes.
A portion of the profits are expected to remain with the central securities depositories, which hold reserves to cover asset management costs and to deal with any risks, including potential retaliatory measures by Russia. The related expenses and corporate tax will also be deducted from the proceeds before they are transferred. According to some estimates, the amount will be around EUR 3 billion of net profit per year.
The vast majority of the funds were frozen through the Belgian clearing house Euroclear, where they brought in about 4.4 billion euros in profit last year.
Profits earned in the past will be temporarily retained and then transferred to the EU no earlier than five years later, the draft proposals say.
In the event of materialization of risks, "unexpected and extraordinary profits received by the central securities depository before February 15, 2024, should be used primarily to cover the relevant costs," one of the documents says. "Conditions should be established for the transfer of amounts temporarily withheld to the Union when they are no longer needed," the draft states.
These proposals will be discussed by EU leaders at a meeting in Brussels later this week, the newspaper points out.
It is also noted that the EU has previously asked central securities depositories that hold frozen reserves and assets worth more than 1 million euros to set aside profits, establish separate accounting procedures, and are prohibited from using unexpected and extraordinary profits they have received. These institutions will be asked to provide regular reports to the EU as part of the bloc's proposals, the newspaper writes.
Addendum
About 260 billion euros of the Russian central bank's assets, mostly in the form of securities and cash, have been immobilized by the G7 countries, the EU, and Australia, with more than two-thirds of them blocked in the EU.
The Biden administration is reportedly pushing G7 allies to immediately confiscate frozen assets and wants to see progress before the leaders' summit in June. But several European countries, including Germany and France, as well as the European Central Bank, are reluctant.
Polish Foreign Minister Radoslaw Sikorski told reporters after a meeting with his EU counterparts in Brussels on Monday that they made a "political decision, though not a legal one" to use the windfall profits.
Josep Borrell, the EU's head of diplomacy, told reporters: "I can't say there was unanimity, but there was a strong consensus to take this decision." He added that some member states wanted more details.
However, some member states are reluctant to support the use of these funds to provide military support to Ukraine, and this split risks delaying progress, according to people familiar with the matter.
